- The Washington Times - Thursday, May 29, 2003

Two behemoths of technology, Microsoft Corp. and AOL Time Warner Inc., announced a wide-ranging agreement yesterday that could make life easier for many computer users while increasing their dominance of the personal-computing world.

Under the agreement, the two companies will collaborate on digital-media and digital-rights management to improve and increase the availability of audio and video on the Internet, as well as make their widely used instant-messaging systems more compatible.

As part of the deal, Microsoft will pay AOL $750 million to settle a private antitrust lawsuit that AOL filed in January 2002 on behalf of its Netscape Navigator Web-browser subsidiary.

AOL Time Warner’s suit sought billions of dollars in damages from Microsoft for crushing Netscape in the 1990s. It acquired Netscape after the federal government filed its antitrust suit against Microsoft. Microsoft develops Internet Explorer, now the most popular browser, and runs the No. 2 U.S. Internet service.

Microsoft was found guilty of illegally protecting its Windows monopoly for personal-computer operating software. The court said Microsoft, the Redmond, Wash., software giant, had waged a campaign to curb distribution of Netscape Navigator to keep it from posing a threat to Windows.

In a conference call with reporters, executives characterized the agreement as a turning point for two companies that have been bitter adversaries.

“This sort of marks a new day,” AOL Chairman Richard Parsons said.

As part of the agreement, Microsoft granted AOL a long-term, royalty-free license to use its Internet Explorer browser with America Online, based in Sterling, Va. That could end up being another nail in the coffin for ailing Netscape.

Mr. Parsons said AOL has no immediate plans to shut down Netscape as a result of further integration of Internet Explorer but that it is “exploring other opportunities” with the business.

Consumer advocates and past critics of the two companies viewed yesterday’s announcement with caution.

Any time two giant corporations work together in markets where they are already dominant, consumers should be wary, said Mark Cooper, director of research at the Consumer Federation of America.

“It bears close watching,” Mr. Cooper said. “Consumers have an immense stake in some of these areas.”

But the agreement could be immensely helpful for consumers and businesses.

AOL and Microsoft are two of the biggest players in the fast-growing instant-messaging business, but their IM services don’t work with each other.

If the two companies make their IM services compatible, it could significantly change the way people communicate electronically and decrease the world’s reliance on e-mail, said Van Baker, an analyst with technology research company Gartner Inc.

“That would be dramatic,” Mr. Baker said, comparing the potential growth of instant messaging to the ubiquity of telephone service if all IM systems work together.

Microsoft Chairman Bill Gates said there is no timetable for making the two IM systems compatible but that it is a goal.

As for new types of Internet content and other digital media that could come out of the agreement, neither Mr. Parsons nor Mr. Gates gave specifics.

But both said the agreement is far reaching and would improve delivery of such things as music, videos and news reports through the Internet while improving digital-rights protection using Microsoft software.

All of that could significantly benefit AOL subsidiaries, including record label Warner Music Group, television news channel CNN and Turner Classic Movies.

“It covers a full range of content across multiple platforms,” Mr. Parsons said.

Aware of antitrust concerns, Mr. Gates added that other content and software companies could be involved in the future.

“This is the kickoff,” he said. “We’re hoping to draw others into these activities. There’s a lot of technology and a lot of opportunity that can come out of this.”

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