History of the Internet Part Five: The First Browser War
Welcome to Part Five of our journey through time, learning how the Internet has evolved and studying the effect it has had on our lives.
At the beginning of 1996, Netscape was the frontrunner on the browser market, valued at over $4 billion, and their Navigator software was being used by a majority of web users.
By April 1996, Netscape's share of the market had peaked at 87 percent. Microsoft’s market share was only four percent, but rising.
Java, a Microsoft Killer?
A deal between Netscape and Sun Microsystems meant Java applets could run inside web pages. A big innovation that Java brought was the Java Virtual Machine (JVM).
With earlier programming languages, the programmer needed to rewrite and recompile for each separate platform. With the JVM, even if computers used different operating systems, the software could run on all of them. The Java language set up a virtual machine that only required minimal support from the user’s operating system.
Microsoft’s Bill Gates saw both the benefits and the serious threat that this technology brought. Developers now had a compelling alternative to using Windows APIs for building their applications. Why write an application that only runs on Windows when you can write one that works with all operating systems?
Cascading Style Sheets
In Part Two, we learned how Tim Berners-Lee created HTTP and HTML and founded the World Wide Web Consortium (W3C) to support efforts to evolve the World Wide Web.
To help keep pace with a fast-moving industry, the consortium decided to stop just short of issuing standards and instead made formal recommendations. In practice, however, the recommendations that they made are today generally viewed as web standards.
One of the problems of early web pages was how to present the information written in HTML.
In 1994, a W3C employee, Norwegian Håkon Wium Lie, proposed a new type of style sheet for the web that he called “Cascading HTML style sheets.”
By the end of 1996, the CSS project was completed and became an official W3C recommendation.
The other recommendation to come out of the W3C in 1996 was HTTP 1.0.
The original version of HyperText Transfer Protocol (HTTP) was written by Tim Berners-Lee in 1991. The key to its widespread adoption was its simplicity. Client machines could issue a GET command to request a document, and servers would then respond with a message in HyperText Markup Language (HTML).
The HTTP version 1 protocol was fully specified by May 1996. However, browser manufacturers like Microsoft and Netscape could not afford to delay their product launches to wait for the official W3C recommendations, and were already supporting HTTP/1.1 by this time.
HTTP/1.1 offered much-improved web performance over 1.0, and more than 20 years later, HTTP/1.1 remains in common use today.
One weakness of the HTTP/1.1 protocol is that messages being transmitted are not encrypted, so it is easy for an unknown person to intercept and possibly alter those messages. This vulnerability makes the protocol completely inappropriate for commercial websites.
A continuing theme in the history of the Internet is concern over safety and security. Just as they do now, parents worried over how to stop their children from seeing inappropriate material. There were also concerns over financial crime: how could we trust a website to keep information like our credit card details secure?
Netscape had released its solution for communicating securely over the Internet as part of its Netscape Navigator browser. It was called “Secure Sockets Layer” (SSL) and the technology authenticated who was on each side of the Internet connection. After authentication, users would send encrypted messages to each other that (in theory) only they could decrypt.
By 1996, Netscape was ready to support a standard for everyone, and responsibility for defining the security protocol was passed over to the Internet Engineering Task Force (IETF).
In 1996, the Internet Society was restructured, and the IETF was defined as an “organized activity of the Internet Society.”The IETF began a three-year project to enhance the security of SSL and create a standard on which the whole world could rely.
Internet Safety and Censorship
At a time when Internet engineers were working to prevent credit card fraud, the U.S. government was focused on protecting people from content the government considered to be harmful.
The Communication Decency Act (CDA) was the first legislation passed to regulate the use of the Internet. It was signed by President Bill Clinton in February 1996, with the intended aim of reducing indecency and obscenity in cyberspace.
This legislation was challenged as an attack on the First Amendment, and in June 1996, federal judges in Philadelphia blocked part of the CDA, saying it would infringe upon the free speech rights of adults. A further portion of the act was struck down by a federal court in New York the following month.
The web community realized that a technical solution would protect consumers and also influence the legal debates. The W3C recommended the Platform for Internet Content Selection (PICS), which gave web authors the ability to label web pages that were inappropriate for children, thereby helping parents and teachers control what children and students could access.
This technology debuted as part of Internet Explorer 3.
Internet Explorer 3
Microsoft bundled Internet Explorer 3 free with Windows 95. Because the license agreement between Microsoft and browser manufacturers Spyglass mentioned a percentage cut on software sales, Spyglass was unhappy to learn that Microsoft was making no direct revenues on IE and that they would only receive the minimum quarterly fee.
Spyglass threatened Microsoft with a contractual audit, and Microsoft later settled for $8 million. Spyglass technology was essential to Microsoft getting an early foothold in the browser market, but Microsoft was also in the process of moving away from their technology and making Internet Explorer their own first-party product.
Early Browser Standardization
Due to the differences between Internet browsers, and good old-fashioned developer laziness, many websites in 1996 only looked good in one specific browser. It was easier for developers to tell their users which browser to use for their website, rather than go to the effort of supporting whichever browser the user preferred.
Tim Berners-Lee was not happy about this situation. In an interview with Technology Review in July 1996, he said, “Anyone who slaps a ‘this page is best viewed with Browser X' label on a Web page appears to be yearning for the bad old days, before the Web.”
It was important for web development companies and individuals to be reminded of the need to support multiple browsers. Cari D. Burstein recognized that users should be able to use their preferred browser and still have a good experience, and so began the “Viewable With Any Browser” campaign.
An even bigger problem was the need for much better standardization from browser manufacturers.
In October 1996, PC Magazine issued a statement: “The true winner of the browser war is the user who can use both Netscape Navigator 3.0 and Microsoft Internet Explorer 3.0, but if you're limited to one browser, Netscape Navigator 3.0 is still the best choice.”
This was a positive way to spin it, because it was to the customer’s detriment that they needed to try out websites on multiple browsers to learn which browser worked acceptably for that particular site.
Microsoft’s Long Fight Back
By the end of 1996, there were 36 million users on the Internet. Netscape employed more than 2,000 people, and its reported revenues of $346 million showed that the Internet was becoming big business.
Microsoft was dominant in the desktop market, but in the browser market they were well behind, with around 10 percent market share. However, they had an advantage over Netscape in that their browser came pre-installed with some versions of Windows 95. Unlike Netscape, Microsoft did not need to charge any customers for their browser, as they were earning huge amounts of money from their operating system sales.
Microsoft was also proactive in reaching deals with online providers such as CompuServe, America Online, and MCI to make Internet Explorer the preferred browser for their subscribers. Microsoft understood that the majority of potential customers were not yet using the Internet, and that enticing those people was just as important for their market share as was matching Netscape on features and user experience.
A major advantage that Netscape had over Microsoft was that its browser was available on multiple operating systems, including Macintosh and Unix. Microsoft was limited to only Windows—until they decided to reach out further.
At Macworld ‘97, there was a mixed reaction to the news that Apple would be partnering with Microsoft.
At the time, Apple was a fallen giant of the industry. Their original CEO Steve Jobs had recently rejoined the company after Apple bought out his company NeXT Software.
Steve Jobs had a long and sour history with Bill Gates, but Jobs knew that he had to make bold professional decisions for Apple to recover its once-strong market position.
Both Jobs and Gates understood that they were in a position where they could mutually benefit from the other’s cooperation. Apple needed a cash injection, and Microsoft needed to sell its software to Macintosh customers. Microsoft Office was a popular addition to the Macintosh, but Internet Explorer was less so.
Jobs tried to sound confident, but his body language revealed the awkwardness he felt as he announced that Internet Explorer would be the default browser on the Macintosh. Many of the die-hard Apple fans in the audience jeered and gave Gates a harsh reception when he appeared to them on screen via satellite video link.
Jobs succeeded in converting many (but not all) in the audience by saying:
“We have to let go of this notion that in order for Apple to win, Microsoft has to lose. And we have to embrace the notion that for Apple to win, Apple has to do a really good job. And if others can help us, that’s great, because we need all the help we can get.”
Although the partnership with Microsoft and Apple never had a chance of lasting forever, in the short term this deal helped Apple to financially recover and aided Microsoft’s position in the browser market.
Netscape’s view of this deal was much bleaker: Apple needed Microsoft for its survival, and so Netscape’s browser was now being largely shut out of the Mac desktop market.
Internet Explorer 4
The first product that would seriously challenge Netscape was Internet Explorer 4, which arrived with a new layout engine called Trident. Trident was a software component that allowed developers to add web browsing functionality to their own applications via a COM interface.
In future years, this Microsoft technology became the foundation of several browsers.
Marketed using the tagline “The Web the Way You Want It,” Internet Explorer 4 had a controversial release.
Microsoft employees played a prank on Netscape by placing a giant Internet Explorer logo on the lawn of the Netscape office, reportedly after a party celebrating the release.
According to Netscape employees, Netscape turned the prank to their own advantage by standing their company’s mascot, Mozilla, on top of the Internet Explorer logo with his thumb up and a grin on his face, and adding a placard reading “Netscape 72, Microsoft 18” referring to the current market share percentages.
Since Microsoft declined to comment, we don’t know for sure who delivered the logo to Netscape, but in the years that followed, Microsoft would instead send congratulatory cakes to their competitor.
Overall, Microsoft enjoyed an excellent year in 1997, with revenues growing to $11 billion, employee headcount up to more than 22,000, and profits of more than $3 billion.
Netscape had a terrible year. Business pressure from Microsoft contributed to a crash in Netscape’s stock price in 1997 and forced the company to make dramatic changes to its business strategy. It reported an $88 million loss and laid off 400 of its 3,200 employees.
To remain competitive with Microsoft, Netscape decided to match them on price by making both its Navigator and Communicator products free.
Netscape’s head technologist Marc Andreessen made the cover of the March 1998 edition of Upside magazine. When asked about Microsoft’s gains in the browser market, he replied,
“There are two things Microsoft’s been doing on the client side. One is free, and the second is bundled. Free, we’re equalizing now. Bundled is what the DoJ is going after.”
Andreessen admitted that browser revenue had declined faster than he had thought it would, but claimed the company was still in good shape because they would use their browser as a seeding strategy for their new enterprise and web site businesses. He also said that about two thirds of the website visits were still being made using their browsers.
He alleged that Netscape was the best thing to happen to Microsoft, because after Windows 95 launched, “They were running out of things to copy.”
Andreessen also predicted that there would be many Internet-enabled devices besides Windows PCs and Macintoshes in the future, many of which would be running Netscape software.
Speaking privately about Microsoft’s practices, Netscape’s Jim Clark was less optimistic. He complained: “Microsoft has practically killed Netscape. I'll never invest in another thing to compete with them. I'll never touch another market that has anything remotely to do with Microsoft's path.”
Critics Take Aim at Microsoft
Of most concern to Microsoft’s critics was the deepening level of integration between the web browser and the underlying operating system. Was this ‘bundling’ an unfair advantage over the competition? Rival businesses thought so, and began voicing this opinion to the Department of Justice, urging the government to take further action.
Investigators from the Department of Justice had access to an internal Microsoft email from Jim Allchin, Microsoft's top Windows executive, that gave some credence to Andreessen’s bold allegation of copying and also revealed a desire to press its advantage:
“I don't understand how IE is going to win. The current path is simply to copy everything that Netscape does packaging and product-wise. Let's suppose IE is as good as Navigator/Communicator. Who wins? The one with 80% market share … My conclusion is that we must leverage Windows more.”
Susan Creighton and Gary Reback were hired by Netscape and wrote the 222-page “White Paper Regarding Recent Anticompetitive Conduct of Microsoft Corporation.” This report contained numerous extensive allegations such as predatory pricing, exclusive dealing, and secret side payments to distributors for not doing business with Netscape.
When Netscape CEO Jim Barksdale read it, he had mixed feelings. He believed that the allegations were absolutely true, but was concerned that investors might lose confidence in Netscape’s chances in the market or even “read it as the whinings of some sad-sack loser.” He demanded that the white paper could only be shared with the Department of Justice.
Netscape lawyers then put additional pressure on the Department of Justice to take action against Microsoft by lobbying the Federal Trade Commission, the Senate Judiciary Committee and the European Commission.
Microsoft had previously agreed to a request from the Department of Justice not to tie other software products to the sale of their Windows operating system. However, Microsoft argued that Internet Explorer was an operating system feature rather than a separate product.
The Department of Justice disagreed with this assertion, and in October 1997, announced that it was seeking an injunction against Microsoft and asking a federal court to impose a $1-million-a-day fine until Microsoft ceased tying its browser to Windows.
At the Agenda tech conference in Phoenix, Gates mocked the ruling:
“There's no magic line between an application and an operating system that some bureaucrat in Washington should draw. It's like saying that as of 1932, cars didn't have radios in them, so they should never have radios in them.”
The European Commission soon opened its own investigation into Microsoft’s practices, and Sun Microsystems founder Scott McNealy added yet more pressure with a lawsuit over Microsoft's use of Java, which Microsoft would quickly lose.
Witch Hunt Atmosphere?
At Microsoft’s 1997 annual shareholders meeting, Gates claimed the atmosphere had turned into a “witch hunt.” Shortly after the meeting, Microsoft’s Steve Ballmer spoke to journalist Ken Auletta and blasted Sun Microsystems as a “very dumb company” with “sub-50-IQ people.”
Gates saw his company as the victim of an unfair attack from the U.S. government and the company’s competitors. His company had created an operating system that much of the high-tech economy was built on, yet instead of receiving praise, the government was calling him a monopolist.
After winning their first lawsuit against Microsoft, Sun Microsystems considered filing another one. Their attorney Mike Morris argued: “If you're going to strike at the king, you better cut his head off.”
Sun Microsystems’ Scott McNealy allocated $3 million to a secret initiative known as “Project Sherman.” This was a codename for an antitrust lobbying group, referring to the Sherman Antitrust Act that the Department of Justice had previously sued Microsoft for violating; the group had the main objective of influencing the Department of Justice to take tougher action against Microsoft.
The Department of Justice recruited David Boies, one of America’s foremost litigators, who had previously represented IBM in its 13-year antitrust battle. By the end of that trial it was clear to everybody that even if IBM was once a monopoly, it was no longer.
Boies said he stood by his arguments in the IBM case: that it was proper to compete ruthlessly, but he believed Microsoft was a monopoly, unlike IBM.
Attorney Gary Rebuck loved to attack Microsoft, and likened Gates to Rockefeller:
“The only thing J. D. Rockefeller did that Bill Gates hasn't done, is use dynamite against his competitors!”
And to top it all off, the media coverage of Microsoft went from adulation to ridicule. Gates was distraught: “The whole thing is crashing in on me,” he said. “It's all crashing in.”
In February 1998, Senator Orrin Hatch announced that he was planning to hold a hearing on Microsoft, and the following month Gates testified to the U.S. Senate.
In the hearing's final minutes, Hatch managed to pressure Gates into admitting that Microsoft imposed restrictions on Internet Service Providers, precluding them from promoting Netscape. Microsoft was shamed into removing most of these contract provisions the following month.
Netscape’s Jim Barksdale, also testifying at the hearing, produced a simple illustration of the issue, asking the gallery who had a PC. Around three quarters of them raised their hands. He then asked how many of them used a PC without Microsoft’s operating system.
After seeing every hand fall, he simply stated “Gentlemen, that's a monopoly.”
Microsoft Meets the Department of Justice
It was clear that Microsoft and the Department of Justice were not going to agree with each other, either on whether Microsoft was a monopoly or whether it had violated any laws, so the department initiated a U.S. antitrust law trial. The Department of Justice put Microsoft on notice that it intended to file suit sometime before the Windows 98 ship date of May 15. The two groups met on May 5 to see if they could find a way to avoid going to trial.
Gates’ main argument was that if government blocked Microsoft from adding new features into Windows, it would kill his whole business.
David Boies tried to threaten the company:
“Once the United States government files suit against you, everything changes. People you thought you could trust turn against you. People you thought were your allies turn out to be enemies. Everyone is more willing to question you, to resist you. The whole world changes.”
Joel Klein, chief of the Department of Justice Antitrust Division, decided to delay launching the suit to allow more time for negotiations with Microsoft and hopefully reach a settlement. However, no agreement could be found.
In Boies’ mind, Microsoft was underestimating the Department of Justice; perhaps they had decided that if the company lost the case, they could afford it.
A lawsuit was filed on May 18, and Microsoft was charged with four counts of violating the Sherman Act.
In May 1998, in an open letter to customers, partners and shareholders, Gates wrote:
“I want you to know that Microsoft will vigorously defend the fundamental principle at stake in this litigation. The freedom to innovate, improve, and integrate new features into products has been the mainstay of our industry.”
And at the press launch of Windows 98, Gates complained:
“How ironic that in the United States, where freedom and innovation are core values, these regulators are trying to punish an American company that has worked hard and successfully to deliver on those values.”
Microsoft had some reason to be optimistic going into the trial, because during the company’s patent dispute with Apple, they were lambasted by the press but won over the jury.
Judge Jackson decided to avoid a preliminary hearing and move directly to trial. He requested that each side’s 12 witnesses deliver their testimony in writing.
The Hunt for Star Witnesses
The list of witnesses against Microsoft was made up of the company’s enemies, such as IBM, Intuit, Sun, and Netscape, as well as some ostensible allies: Intel, AOL, and Apple.
The Department of Justice courted Steve Jobs at Apple, but he was reluctant to damage his newly improved but fragile relationship with his old adversary — plus he distrusted the government:
“You guys have done nothing, you haven't figured it out, you've been too slow, you'll never change anything. This is an incredibly sensitive time for Apple. Why should I jeopardize the future of my company when I have no faith that the government is going to do anything real?”
Joel Klein declined to give Jobs the assurances he was looking for, and so Jobs provisionally declined to testify.
An important witness was Intel vice president Steven McGeady, whose testimony surprised many. The relationship between Intel and Microsoft was viewed by outsiders as a cozy one, and the term “Wintel” was used as a both a shorthand for a Windows Intel PC and a jibe at their partnership.
In an attempt to stay on reasonable terms with Microsoft, Intel’s CEO Andy Groves insisted that McGeady was only following the wishes of the government, which he could hardly refuse.
Steve Jobs called Andy Groves to find out whether Andy might testify himself, but Andy insisted both he and Intel were neutral regarding the case. On hearing this, Steve Jobs became certain that he should not testify either, but agreed that Avadis “Avie” Tevanian, senior vice president of software engineering at Apple, would testify.
Eric Schmidt, then chairman and CEO of Novell, was approached for his views of Microsoft. He was equally fearful of both Microsoft and government meddling:
“I don’t think there’s much doubt as to the facts. There is a very large question about what to do about it.”
The Deposition of Bill Gates
On August 27 1998, Bill Gates began recording a deposition with David Boies and New York State assistant attorney general Stephen Houck. Gates was, in the later words of the judge, “evasive, dissembling, defiant, arrogant.” Boies and Houck were persistent throughout. It lasted three days and created 20 hours of testimony.
Gates believed that the deposition would only be revealed in written form, however the video would later be released and become the subject of widespread derision.
Gates took pedantry and hair-splitting to the nth degree — for example, questioning the meaning of the word “concerned,” saying, “I’m not sure what you mean by it.”
Gates defended himself saying, “I gave totally, absolutely truthful answers. You’re saying that ‘Oh, it didn’t look good.’ OK, fine. That’s not what a deposition is about.” He also claimed the deposition demonstrated his “most excellent memory.”
David Boies was highly successful at getting underneath the skin of Bill Gates, who later complained to the press:
“Mr Boies has made it clear in the negotiations leading up to the case, he’s really out to destroy Microsoft. He’s really out to take all the good work we’ve done and make us look very bad.”
For Gates, it was personal. But for Boies, it was never personal. He was just doing his job:
“This is not a trial about Bill Gates. It is only in a limited way a trial about Microsoft. This is a trial about certain aspects of Microsoft’s conduct. And it may not be the most important aspects of Microsoft. To get a sense of Gates as a person, you have to look beyond what we’re talking about in this trial.”
In the late ‘90s, Microsoft was an astonishing business success. In a few short years its Internet Explorer browser had gone from an extremely basic tool used by few people to the market leader. But questions continually surrounded Microsoft on whether this success had been achieved fairly.
When it became clear that the U.S. government was serious about pursuing a case against them, Microsoft could have avoided a trial and settled out of court, but their lawyers were optimistic that the company would be cleared of any wrongdoing. The Department of Justice was equally confident in their the belief that their case was the stronger one.
Who would be proven correct? Join us in Part Six for the story of United States v Microsoft Corporation.