July 23, 1998 3:55 PM PDT

Glaser, others blast Microsoft

WASHINGTON--Microsoft asks in its ads: "Where do you want to go today?" Clearly, one place it didn?t want to go today was the Senate Judiciary Committee hearing.

Microsoft rivals, including RealNetworks, Oracle, Lotus, Sybase, and start-up TV Host, testified one by one about the company's alleged strong-arming in its business practices. In the hearing dubbed "Competition and Innovation in the Digital Age: Beyond the Browser Wars," the first witness, RealNetworks CEO Robert Glaser, said that if Microsoft continues its present course, consumers would instead ask: "Is there anywhere I can go except where Microsoft wants me to go?"

Glaser, who spent ten years at Microsoft before starting RealNetworks, demonstrated on a monitor how Microsoft's Windows Media Player "breaks" the RealNetworks' RealPlayer software.

"We welcome innovation and competition from Microsoft," he said. "But if Microsoft 'breaks' competing products, and especially if it uses Windows leverage to do so, this harms customers and innovation."



CNET Radio talks to RealNetworks president Bruce Jacobsen
 
Microsoft has jumped into the market for so-called Web streaming, which allows a computer to act like a television or radio. Besides owning a 10 percent, nonvoting stake in RealNetworks, it also recently acquired VXtreme. In addition, the Redmond giant holds significant stakes in Web streamer VDOnet, as well as Apple Computer, which makes a multimedia authoring tool and playback technology known as QuickTime. Antitrust enforcers had been scrutinizing these relationships.

In his testimony this morning, Oracle CEO Larry Ellison summarized Microsoft's business strategy as, "Copy the product that others innovate, put them into Windows so they can't be unplugged, and then give it away for free."

Added Jeff Papows, president of Lotus: "One of the tactics employed by Microsoft has been to pressure OEMs to distribute Microsoft and only Microsoft productivity applications on their computers.... They're using the fruits of this success to fund their moves into other areas."

TV Host vice president of business development Michael Jeffress weighed in as well. "Since their announcement that they would include a TV program guide in Windows, our relationship to our OEM partners has changed," he said. "For example, several have said, 'How can you leverage what Microsoft is doing?' "

But Mitchell Kertzman, CEO of Sybase, faulted the enforcement of the Sherman Antitrust Act in the digital age, rather than the law itself. "The pace of change in technology is a problem," he said. "By the time enforcement goes into effect, the monopolist has already gotten the benefits they need." (Kertzman is a director of CNET: The Computer Network, which publishes NEWS.COM.)

A Microsoft representative said the cards were unfairly stacked against the software giant. "The hearing was nothing more than lining up Microsoft's competitors, all of whom have an axe to grind, [and giving] them a forum," said spokesman Mark Murray. "It's unfortunate the government committee would take sides in an industry that already is highly competitive."

Microsoft was invited to testify at the hearing, which lasted two and a half hours, but chose not to participate. Its top executives are in the Seattle area today meeting with financial analysts and outlining the company's business strategy. (See related story) Sen. Orrin Hatch (R-Utah),

Orrin Hatch and Patric Leahy
Orrin Hatch, right, confers with Patrick Leahy. AP
who initiated the hearing, said it was justified. "We're getting complaints from all over the place, from people just like you, who are suffering from treatment similar to the way your company has been treated [by Microsoft]," he said in addressing Glaser.

Murray said Glaser's demonstration was misleading because RealNetworks used the most recent beta version of the product, released last week, during the presentation. He said that all previous versions of the Windows Media Player had supported RealPlayer. The software used in the demonstration was such a recent beta that Microsoft had not yet developed support for it, he said.

Sen. Robert Toricelli (D-New Jersey) said he had an affidavit from Paul Maritz, group vice president at Microsoft, stating that Glaser meant to use today's testimony as leverage to reach a licensing agreement with Microsoft.

According to the affidavit, which Microsoft released after today's hearing, "Mr. Glaser said that he was prepared to 'negotiate all night if that's what it takes' to come to terms with Microsoft. Mr. Glaser said that if the negotiations he proposed resulted in an agreement between the two companies, he would not testify the next day."

Glaser denied the charge. "I'm here today because I believe that Microsoft is taking actions that create obstacles to the freedom and openness of the Internet," he countered. "In the new world of the Internet, it matters less if you are large or small; it matters less if you are one of the gatekeepers of traditional media. If you have a good idea, you can reach an audience of millions."

After hearing testimonies and questioning the witnesses, Sen. Hatch said it appeared that Microsoft had overstepped its bounds and the Justice Department should take a close look at the company's business dealings.

"Seems to [me] that for Microsoft to exploit its monopolistic control over the operating system to break competitors' software, is an abuse of their monopolistic power," said Hatch. "I think this is something that the DOJ has to take very seriously."

Hatch added he was prepared to hold as many hearing as necessary to hear testimony from others who have allegations of Microsoft's unfair business practices.

The gathering is the latest public showdown between Hatch and Microsoft. In November, Hatch chastised Microsoft for agreements the software giant had with Internet service providers that forbade them from telling some new customers that alternatives exist to the Internet Explorer browser. The deal also let Microsoft terminate a deal if a certain quota of an ISP's customers didn't use the Internet Explorer. The level was 85 percent in some cases.

A second hearing in March took on all the characteristics of a heavyweight title fight, as Microsoft and its ally Dell Computer rumbled against archrivals Sun Microsystems and Netscape Communications. Most of that hearing focused on the browser wars and Microsoft's marketing of Internet Explorer, which is also at the core of two antitrust lawsuits filed by the Justice Department and 20 states.

More recently, Hatch told a subcommittee investigating consolidation among telecommunications companies that Microsoft's foray into the industry might overshadow concerns about the way the company is positioning itself in the browser market.

NEWS.COM's Randy Weston and Reuters contributed to this report.

 

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