The Effect of Microsoft’s Actions in the IAP Channel: The Rise of Internet Explorer

d. Effect of Microsoft’s Actions in the IAP Channel

307. As described above, Microsoft gave valuable consideration at no charge to IAPs that agreed to distribute and promote a product that brought no revenue to Microsoft. By tendering additional valuable perquisites (at the cost of lost revenue), Microsoft induced IAPs to restrict drastically their distribution and promotion of Navigator.

     
     

     With the offer of still other concessions, Microsoft induced IAPs to turn subscribers already using Navigator into Internet Explorer users.

308. As Microsoft hoped and anticipated, the inducements it gave out gratis, as well as the restrictive conditions it tied to those inducements, had, and continue to have, a substantial exclusionary impact.

     
     

     First, many more copies of Internet Explorer have been distributed, and many more IAPs have standardized on Internet Explorer, than would have been the case if Microsoft had not invested great sums, and sacrificed potential sources of revenue, with the sole purpose of protecting the applications barrier to entry.

     
     

     Second, the restrictive terms in the agreements have prevented IAPs from meeting consumer demand for copies of non-Microsoft browsing software pre-configured for those services. The IAPs subject to the most severe restrictions comprise fourteen of the top fifteen access providers in North America and account for a large majority of all Internet access subscriptions in this part of the world.

     
     

309. Not surprisingly, the inducements that Microsoft gave out and the restrictions it conditioned them upon have resulted in a substantial increase in Internet Explorer’s usage share. A study Microsoft conducted shows that at the end of 1997, Internet Explorer enjoyed a ninetyfour percent weighted average share of shipments of browsing software by ISPs that had agreed to make Internet Explorer their default browser.

     
     

     By contrast, the study shows that Internet Explorer had only a fourteen percent weighted average share of shipments of browsing software by ISPs that had not agreed to make Internet Explorer their default browser.

     
     

310. The same study shows that Microsoft’s weighted average share of browser usage by subscribers to ISPs that had made Internet Explorer their default browser was over sixty percent at the end of 1997, whereas its weighted average share of browser usage by subscribers to ISPs that did not make Internet Explorer their default browser was less than twenty percent.

     
     

311. An appropriate use of the AdKnowledge hit data shows the difference in Internet Explorer’s success among categories of IAPs subject to different levels of distribution and promotion restrictions (see Section V.H.1., infra, for a description of the method by which AdKnowledge collects data).

     
     

     One category was hits originating from subscribers to IAPs that, according to a chart prepared by Microsoft for its internal use, were not subject to any distribution or promotion restrictions. Another category was hits originating from subscribers to any IAP. A third category was hits originating from subscribers to AOL and CompuServe.

     
     

     The hit data show that, from January 1997 to August 1998, Internet Explorer’s usage share among subscribers to IAPs that were uninhibited by restrictions rose ten points, from about twenty to about thirty percent.

     
     

     Over the same period, Internet Explorer’s usage share among all IAP subscribers, including those subject to restrictions, rose twenty-seven points, from twenty-two to forty-nine percent.

     
     

     
     

     Finally, Internet’s Explorer’s usage share among subscribers to two IAPs subject to the most severe restrictions, AOL and CompuServe, rose sixty-five points, from twenty-two to eighty-seven percent. The differences in the degree of Internet Explorer’s success in the three categories reveal the exclusionary effect of Microsoft’s interdiction of Navigator in the IAP channel.

About HackerNoon Legal PDF Series: We bring you the most important technical and insightful public domain court case filings.

This court case Civil Action No. 98-1232 (TPJ) retrieved on 2-10-2023, from justice.gov is part of the public domain. The court-created documents are works of the federal government, and under copyright law, are automatically placed in the public domain and may be shared without legal restriction.