Microsoft Remedy Hearings: Microsoft Killed Custom PCs, Compatible Web Services, AOL Says

During yesterday's antitrust remedy hearings, an AOL Time Warner executive testified under cross-examination that Microsoft prevented PC manufacturers from making custom PCs and hindered AOL's efforts to interoperate with Microsoft .NET Web services. AOL Vice President John Borthwick said that several PC makers were interested in working with AOL to make kids' computers with Harry Potter and Lego themes, but Microsoft's Windows licensing policies prevented them from doing so. Also, he said, Microsoft essentially forced AOL to join the Liberty Alliance--a Microsoft .NET Passport competitor--when Microsoft refused to give AOL access to the technical information it needed to make AOL Magic Carpet interoperate with Passport; AOL realized that to be successful its Web-services software needed to work with more dominant and established services.

"Microsoft's proposed remedy does nothing to ensure that Microsoft will not use its Windows [OS] to thwart platform competition in the market for Web services," Borthwick said during an earlier written testimony, which the court issued in written form this week.

Borthwick showed the court photographs of prototype Harry Potter and Lego-themed PCs, which companies such as Compaq, Dell, and Hewlett-Packard (HP) wanted to sell to consumers. "Such products could increase customer choice, promote innovation, and foster the distribution of non-Microsoft (software) and applications," Borthwick said. But Microsoft refused to let the PC manufacturers make the devices because they would have required extensive changes to Windows. But Microsoft attorney Richard Pepperman said that letting the companies make such PCs would open the door for other "crummy" Windows variants.

Borthwick also said that Microsoft is extending its Windows dominance to the Web by requiring its users to join .NET Passport to access certain Internet services. AOL wanted its similar Web-authentication project--code-named Magic Carpet--to interoperate with .NET Passport, he said, but Microsoft refused. And by bundling an annoying and recurring Passport sign-up offer with Windows XP (the offer runs when users first boot the system), Microsoft is leveraging its Windows monopoly to unfairly gain users for its online services. "[After] an XP user has signed up for .NET Passport, that user is automatically authenticated into Microsoft's services, making it less likely that he or she will sign up for non-Microsoft products or services," Borthwick contended.

Microsoft says that AOL's Magic Carpet and .NET Passport claims are exaggerated because AOL approached Microsoft only once--back when Magic Carpet was still in the planning stages. "Magic Carpet was nothing but a notion [at the time]," a Microsoft spokesperson said. "They ambushed us with three separate demands." Microsoft declined to meet those unspecified demands, according to the spokesperson.

About 165 million people have signed up for .NET Passport, although most of them did so solely to access the free Web-based Hotmail service, and few use any of the other available .NET Passport-related Web services.