Direct Testimony Of Glenn E. Weadock : U.S. V. Microsoft Corp.; State Of New York Ex Rel. Attorney General Dennis C. Cacco, Et Al. V. Microsoft Corp.

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

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.I.  OVERVIEW
   1.  I am providing this testimony based on substantial experience working with,
teaching about, and writing about Microsoft operating system and application products,
and on my conversations with computer managers in large organizations, deposition
testimony, and documents in connection with this case. The major points discussed in
this testimony are as follows:
  It is difficult to define software products according to any specific grouping of
   files. Software products are typically defined according to their features.
 

  Organizations generally have different needs for browser products, which they
   view as applications, and operating system products.
 

  Whereas all organizations using computers need operating systems, some wish
   to have no browsers deployed to some or all users.
 

  Many organizations wish to use browser products and have compelling reasons
   to standardize on a single such product, but want to select that product
   independently of any particular operating system.
 

  Many organizations, having standardized on Windows 95 for a large portion of
   their operating system needs, have sought, at some cost, to remove Internet
   Explorer from their PCs by either deleting the means of access to Internet
   Explorer or standardizing on the original version of Windows 95, which did
   not come with Internet Explorer at all.
 

  Some organizations, having moved to Windows 98 or considering doing so, are
   confronted with the inability to remove Internet Explorer from the operating
   system, and accordingly view themselves as having little or no choice but to
   standardize on Internet Explorer.
 

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II.   BACKGROUND AND QUALIFICATIONS

   2.  I am a seminar developer, seminar instructor, author of computer books and
videos, and computer consultant. My computer knowledge is a combination of education,
years of hands-on experience, and thousands of discussions in formal and informal
settings with other computer users. I am President of Independent Software, Inc., in
Golden, Colorado, a company I co-founded in 1982.
   3.  Over the years, my consulting activities have covered a wide range of
computing topics, including hardware platforms and software environments. My early
consulting practice focused on custom programming and system integration. Later, I
focused on technical support and microcomputer networking in organizations of all sizes.
Recently, writing and teaching have occupied more of my time than consulting. I have
submitted my curriculum vitae to the Court as Government Exhibit 1177.
   4.  In the seminar field, I have developed seminars about Windows 3.1,
Windows 95, and Windows 98, networking PCs, and Help Desks (i.e., technical
computer support groups inside medium to large organizations), and have led technical
seminars throughout the United States, Canada, and the United Kingdom, in association
with Data-Tech Institute, since 1988.
   5.  I am the author or coauthor of the following books: Bulletproofing Windows
98 (McGraw-Hill, October 1998); Windows 98 Registry For Dummies (IDG, 1998);
Windows 95 Registry For Dummies (IDG, 1995); Small Business Networking For
Dummies (IDG, 1998); Intranet Publishing For Dummies (IDG, 1997); Bulletproofing
Windows 95 (McGraw-Hill, 1997); Creating Cool PowerPoint 97 Presentations (IDG,

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1997); Bulletproofing Client/Server Systems (McGraw-Hill, 1997); Bulletproofing
NetWare (McGraw-Hill, 1996); Bulletproof Your PC Network (McGraw-Hill, 1996); and
Exploding the Computer Myth (Wiley, 1995). I have also written several articles in
computer and business magazines, and I have been interviewed by Computerworld,
MacWeek, and Inc. magazines on business computing issues.
   6.  As a video author, I have developed several long-format technical computer
videos on subjects including Windows 95 and Help Desk management. I also contributed
to the development of several Internet-related computer videos.
   7.  I am a Microsoft Certified Professional, certified specifically as a Windows
95 Product Specialist, Windows 95 Migration Specialist, and Windows 3.1 Product
Specialist. I also have participated and am currently participating in a number of beta test
programs (i.e., programs in which the creator of software products distributes pre-release
versions of products to a limited set of users for testing, experimentation, and feedback),
including Windows 98 and Windows NT 5.0. My current professional memberships
include the American Society for Training and Development and the Association for
Computing Machinery.
   8.  I hold a Bachelor of Science in General Engineering from Stanford
University, where I graduated with distinction in 1980. My course of study included
computer science courses and engineering courses requiring computer programming. I
have continued my technical education since then by attending seminars and courses on
Windows, networking, programming, communications, and the Internet.

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   9.  In October 1997, the Department of Justice asked me to provide consulting
services regarding Windows 95 and Internet Explorer. I have since provided services
ranging from explaining features of Windows and Internet Explorer to performing
experiments and tests with those products, and other products, regarding features, design,
removability, compatibility, and the user interface. I directed the creation of a videodisc
used in the January 13, 1998 contempt hearing, and testified in that hearing as to the
results of my tests. I have provided information and commentary to DOJ regarding
corporate and end-user computing issues, as much of my writing, teaching, and
consulting concerns those subjects. I have commented on filed documents (briefs and
depositions) in order to clarify technical issues and provide insight relating to end user
and corporate concerns with regard to operating system, browser, and other software
products.
   10. This testimony relies upon the following sources of information:
  My sixteen years' experience in the computer industry, including my own work
   with the Internet and multiple versions of Microsoft's Windows operating system
   products;
 

  Research that I have done in the course of writing eleven books, six seminars, and
   four videos;
 

  Thousands of articles and books that I have read about computing and computers;
 

  Conversations, both in person and by e-mail, that I have had with Windows
   software developers;
 

  Conversations that I have had in seminar and consulting settings with hundreds of
   computer professionals who work in the Windows and Internet fields, particularly

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   with regard to issues of support and management of networks of computer users in
   large- and medium-sized organizations;
 

  Interviews with corporate PC managers in which I have participated at the request
   of the Justice Department;
 

  Summaries of interviews that DOJ representatives have conducted of corporate PC
   managers;
  Research and experimentation done at the request of DOJ with different versions
   of Windows 95, Windows 98, Internet Explorer, and other software products;
 

  My review of documents and deposition testimony (of Microsoft employees and
   other witnesses) in the months prior to this trial; and
 

  My own experiences in custom, non-commercial application software
   development.
 

   11. The interviews in which I have participated at the request of the Justice
Department included top-level technology managers (Chief Information Officers, Vice
Presidents of Information Services, and the like) from the following organizations:1
American Stores; Citibank; ConAgra; Federal Express; Florida Department of Revenue;
GE Supply; Informix; J.C. Penney; Liberty Corporation; Playboy; Morgan Stanley/Dean
Witter; Sabre Group; and US Steel Group. The total number of PCs under management
by the individuals I spoke with is approximately 246,500.

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   12. The conversations that were summarized for me by the Justice Department
included top-level technology managers from the following organizations: Boeing;
Chrysler; Ford; John Deere; and Motorola. The total number of PCs under management
by the individuals in this group is approximately 366,000.
 

III.  DEFINING SOFTWARE PRODUCTS
  A.   Given the different ways that software products can be
        compartmentalized into files, the most reliable and useful definition for
        a software product is that product's feature set.
 

   13. Software is among the most abstract and difficult products to understand
and to define. Given the fact, as I discuss in greater detail below, that software
developers can commingle code units (subroutines) with other, unrelated code units into a
single DLL file on disk, it is more appropriate, natural, and intuitive, to think of the
meaning of "software product" as a feature set -- that is, what the user sees -- than as a
fixed set of files.
 

   14. Attempting to define software as a particular collection of files is ultimately
impossible if code units within the same file are shared, either by multiple applications or
by a single application and an operating system. For example, Microsoft's word
processing software product, Word for Windows, ships with the file COMCTL32.DLL,
but that file is also used by Windows 95. Is the file COMCTL32.DLL part of Word for
Windows, part of Windows 95, or both? The answer is simple. If a file is relied upon by
both products, then it is can be considered a "part" of both, but it cannot be considered an

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exclusive "part" of either. Attempting to define software strictly as a collection of files is
a fruitless exercise when some of those files perform double duty in different contexts.
As the director of information technologies for US Steel Group stated during an
interview: "You cannot isolate application code easily anymore." Similarly, Scott Vesey,
Boeing's Windows Web Browser Manager: "You know, it becomes very difficult to
draw a specific line at which you've drawn a boundary between operating system and
application." (S. Vesey Deposition, 155:23-25.)
   15. Indeed, both industry professionals and computer customers think of a
software product more as that which enables a set of related features than as a collection
of specific files. For example, when a reviewer evaluates a software product in a
computer magazine, the reviewer typically focuses on that product's feature set: "This
product can do X, but not Y," and so forth. The list of files that come in the box, or the
list of code units that those files contain, is rarely if ever provided. Similarly, when I
teach computer concepts to users, I commonly hear users describe word processing
software as a program that provides text creation, editing, and printing features. In my
experience, users typically think of a browser as a program that provides Web page
display and navigational features on the public Internet or a private intranet.
   16. Consistent with my experience, Microsoft employees also tend to describe
software products in terms of feature sets. For example, Chris Jones, Microsoft's Product
Unit Manager for Internet Explorer, has described two of the products Microsoft
associates with Internet Explorer as follows:

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        Q:   What is Outlook Express generally?
        A:   It's a POP 3 mail client, POP3 and IMAP.
 

                        . . . . . . .
 

        Q:   What is NetMeeting generally?
        A:   It's a set of services that let you do video phone and
             video conferencing. (C. Jones Deposition, 80:2-4;
             140:18-19)
 

Mr. Jones described Internet Explorer, as developed for the Apple Macintosh operating
system, in similar terms:
        Q:  How then would you define what competitive browser
             for other platforms, non-Win32 platforms, what that
             means?
 

        A:  It's a very interesting conversation. In some senses it's
             just what our customers expect and want from us. It's
             the thing that will let them go and deploy and take
             advantage of the services on the Internet and
             computing on the Internet. So what does competitive
             browsing mean, if you are asking me what package we
             ship on the Macintosh, we'll ship a package IE5 that
             contains a set of features that people can use to browse
             the Web, that ISVs can target and ICPs can target. (C.
             Jones Deposition, 116:2-14.)
 

   17. At the same time, Microsoft executives have acknowledged the difficulty of
defining Internet Explorer according to files or code. Most notably, David Cole, who has
managed Microsoft's Internet Explorer development, stated in an internal e-mail on
January 2, 1998 (less than two weeks prior to a hearing held by this Court in which Mr.
Cole testified) that:
        Taking out all of "retail IE" per the court order renders Win95
        unbootable per my long affidavit. We can add files back one

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        at a time and see what starts working, but I don't think there
        is PR or legal benefit of explaining that. There is controversy
        as to whether some files like comctl32.dll and others that
        were part of the original Win95 should be fairly included on
        the list, but the court said all of retail IE. We've never sat
        down and decide [sic] what files are part of what, we just ship
        them where needed. (Exhibit 989, D. Cole message to B.
        Chase et al., January 2, 1998 [emphasis added])
 

  B.   Typical PC users can only use software products that are loaded and
        readily accessible.
 

   18. The existence of a software product on any particular PC – that is, whether
it is effectively present or absent from the customer standpoint – depends on both the
presence of the software enabling the product's feature set, and the means to use that
feature set. Without the means of access, a typical user has no convenient way to use (or
even determine the existence of) the software that exists on a CD-ROM disc, PC hard
drive, or floppy diskette. As John Kies, a Senior Product Manager at Packard Bell/NEC,
has testified:
        Q:  We talked about the option as providing Packard
             Bell/NEC with the option of removing the icon and the
             Internet Explorer from the start menu. From a
             marketing perspective, how does removal of the
             Internet Explorer icon and Internet Explorer from the
             start menu affect whether or not customers perceive
             that the Internet Explorer is removed or not?
 

        A:  Well, if we provide it without Internet Explorer in the
             menu item, the customers feel like there's no browser
             installed whether or not the actual code may exist
             below the surface of the user interface. So we wanted
             to give our customers the idea that they were receiving
             as clean an OS as we could provide them. (J. Kies
             Deposition, 27:1-16.)

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   19. In fact, it is possible, and sometimes a matter of commercial practice, to
have software that exists on a disk or PC in the sense that its code modules are physically
present, but does not exist in any practical way from the user's standpoint because the
software is hidden, protected, or otherwise disabled. Consider the following examples:
  Philip Barrett, senior vice president of RealNetworks, has described his company's
   RealPlayer software in these terms:
 

        Q:  Focusing on the RealPlayer and the PlayerPlus, does RealNetworks
             distribute a version of the Player that includes the PlayerPlus
             features not activated?
 

        A:  Yes. The way the Player and PlayerPlus are related is basically
             there's one Player. PlayerPlus features are activated by a license key
             that one gets by coming to our Web site and going through a secure
             form and purchasing that license key, although they believe they are
             purchasing PlayerPlus.
 

        Q:  So if a customer doesn't purchase this activation key, what does the
             user have?
 

        A:  The user has the standard, what we call, ubiquity Player, the free
             Player.
 

        Q:  But as a technical matter, does the user have the code that
             implements the PlayerPlus features?
 

        A:  Yes.
 

        Q:  Is it correct to say that even if a customer has the bits of code that
             make up the PlayerPlus, if the user does not have access to the
             PlayerPlus features, then, as a practical matter, the user doesn't have
             the PlayerPlus product?
 

        A:  From the user's perspective, what they have is the standard Player.
 

        Q:  But not PlayerPlus?

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        A:  Correct, not PlayerPlus.
 

        Q:  And that's because they're unable to access the PlayerPlus features?
 

        A:  That is correct. (P. Barrett Deposition, 10/7/98, 45:)
 

  Adobe Type On Call is a CD that contains many typefaces, but the user must
   receive an alphanumeric password in order to unlock them. This is the vendor's
   method for ensuring that payment is received before the user can work with any
   given typeface.
 

  Apple's QuickTime Movie Player is a program that plays back digitized movies on
   a computer screen. As Timothy Schaaff, Senior Director of the Interactive Media
   Group within Apple, stated in his September 16, 1998 deposition:
 

             Well, the business model that we have articulated for
             QuickTime for the last six months or so has been a
             model where people download the package of
             QuickTime software for free. And then if they – and
             by spending a small amount of money, they can obtain
             an access key effectively that would unlock additional
             capabilities. (T. Schaaff Deposition, 9/16/98, 455:5-
             11.)
 

  A common way of distributing software is by making "trialware" or "shareware"
   freely available on the Internet. A customer can download a program and use it for
   a fixed period of time, say, 30 days. At the end of that time, in one common
   scenario, the software may remain on the user's PC hard drive, but will no longer
   function until the user pays a license fee and receives a password or a special
   small file that unlocks the program. Expired trialware or shareware physically
   exists on the PC in terms of bits and bytes, but once expired, the program is
   effectively absent until the user pays for it.

IV.  CUSTOMER DEMAND FOR BROWSER AND OPERATING SYSTEM
   PRODUCTS
 

  A.   For a variety of reasons, organizations generally value the ability to
        make application software decisions independently from operating
        system decisions.

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   20. Organizations2 typically evaluate, purchase, manage, train, and support
operating system software separately from application software. For example, operating
system software evaluations and purchases must consider computer hardware issues to a
much greater degree than application software evaluations and purchases, as the operating
system typically "insulates" applications from hardware details. Consequently, based on
my consulting and seminar experience, organizations generally value the ability to make
application software decisions independently from operating system decisions. Indeed,
the decision making process within most organizations is such that operating system
software and application software decisions occur separately, either in time – such as
when an organization evaluates which applications it needs first, and then selects the
operating system later, or when an organization wishes to make application decisions
across a variety of operating systems (as I discuss below) – or in terms of who makes the
decision (as is the case, for example, at American Stores, Boeing, and US Steel Group),
or both. Conversely, no information technology manager has ever told me that he or she

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does not value the ability to make application software decisions independently from
operating system decisions.
  B.   Organizations' needs and expectations for browser products are
        fundamentally different than their needs and expectations for operating
        system software products.
 

   21. Managers at many organizations (for example, ConAgra, Morgan Stanley
Dean Witter, J. C. Penney, Playboy, Florida Department of Revenue, Boeing, GE
Supply) have told me that they value the flexibility to make browser decisions
independently from operating system decisions. For example, the CIO of ConAgra told
me on September 15 that his organization's choice of Windows NT 4.0 was not affected
by the browser issue "at all." Similarly, Boeing's Scott Vesey stated in his deposition
that "Those [browser standardization or browser acquisition] decisions have been made
separately from operating system decisions." (S. Vesey Deposition, 104:9-10.)
   22. Organization managers have expressed that their needs and expectations for
browser products are fundamentally different than their needs and expectations for
operating system software products. Managers typically (indeed, as far as I'm aware,
universally) consider Microsoft Windows 95, Windows 98, and Windows NT in the
category of operating system software.3 Microsoft publicly characterizes these products
as operating systems, and to my knowledge has never characterized them otherwise.

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Conversely, organizations typically consider browser software as application software,
like e-mail or word processing, not as an operating system or as part of a particular
operating system. I have recently heard or read this view from conversations or
documents from Boeing (see Exhibit 636, Boeing "Desktop Integration Roadmap"
presentation (TBC 000348-000390)), ConAgra, Morgan Stanley Dean Witter, J. C.
Penney, Playboy, Florida Department of Revenue, Boeing, and GE Supply. Technology
managers tend to be definite on this point, using phrases such as:
    "No question – the browser is the same type software as e-mail or calendar
        applications." (Steve Ruegnitz, Morgan Stanley); or
 

    "The browser decision is the same kind of decision as an e-mail or word
        processing decision." (Paul Kallas, Playboy); or
 

    ". . . browsers are considered by most of our customers as a third party
        application." (J. Kies [Senior Product Manager for Packard Bell/NEC]
        Deposition, 9/11/98, 25:10-12); or
 

    "In the same way that we would want to be able to choose what graphics
        editor or what HTML editing product or what word processor we're using,
        we would want to be able to choose what Web browser we're using for
        those same business reasons." (Scott Vesey [Boeing] Deposition, 104:19-
        23).
Similarly, Dr. Michael Dertouzos, Director of the Laboratory for Computer Science at
MIT, and formerly a Microsoft witness in this case, made this point quite clearly during
deposition testimony in this case on October 2, 1998:
        Q:  Is a browser an application?
 

        A:  Historically and today, it is the case that browsers are treated as
             applications. (M. Dertouzos Deposition, 10/2/98, 36:1-2.)
 

                       . . . . . . . .

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             I am not prepared to opine about the innards of any of these systems
             today as to how well they do one thing or another. However, there is
             a definite difference between the commands used by browsers and
             the commands used by operating systems. These are two different
             worlds that are always in two different historical contexts. (Id. at
             47:14-21.)
 

No corporate PC manager, in fact no one outside of the Microsoft organization, has ever
described a Web browser to me as operating system software or as part of Windows 95 or
any other operating system.
  C.   Managers in organizations that do desire or require browser software
        on PCs deployed throughout their organizations commonly express
        many reasons to prefer one specific browser over another, and these
        reasons generally do not correspond or relate to their choice of
        particular operating systems.
 

   23. Organizations' needs for operating system and browser software also differ
with respect to the pervasiveness of need for each type of software within the
organization. Whereas all organizations require an operating system in order to address
even their most basic computing needs, not every organization needs browser software.
Internet and intranet browsing is a less universal computing need than, say, being able to
type information at a keyboard. (An intranet is a private computer network that uses
Internet technologies such as Web servers and browsers.) For some organizations, a
demand may exist to have no browser on the PCs of all or some employees. Based on my
experience and my interviews, I am aware of several reasons why this is sometimes the
case:

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        a.  An organization may wish to make it difficult for certain employees
   to access the public Internet, in order to reduce the amount of unproductive time
   employees spend "surfing the ‘Net" on subjects unrelated to their jobs. Without a
   browser, accessing the Internet's World Wide Web is impractical.
        b.  An organization may wish to minimize computer resource use (disk
   space, memory, CPU power, etc.). Unused applications that reside on a computer
   typically tie up such resources. The degree to which this is a concern typically
   depends on the average age of an organization's computers; the older (and
   therefore poorer in resources) the computers are, the greater the organization's
   desire to avoid wasting those resources. As Microsoft's Joe Belfiore has testified:
        Because a PC system is a shared set of resources, memory
        and processor are shared among all the different pieces of
        code that may be running at any time. If any one piece of
        code is taking up more of the shared resources than it needs
        to, then it will impact the performance of the other pieces of
        code…The more we can free up memory and processor so
        that other applications get more of those resources, the faster
        those other applications will run. And that's not specific to
        our code; that's true of any code." (J. Belfiore Deposition,
        138:4-18.)
 

   Resource use is often a concern with programs as large as Internet Explorer. For
   example, a November 1997 memo from Microsoft's Chris Jones to the IE Project
   Team states:
        The IE4 browser, while fast, is simply too big for customers
        to install and adopt, both in terms of memory usage [working
        set] and also in terms of disk footprint [install size]. (Exhibit
        364 (MS7 0004717-4728).)

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   Later in the same memo, Mr. Jones cites "remove size/performance issues
   (working set and install size)" as one of three top product requests corporations
   made to Microsoft in connection with Internet Explorer 4.0.
        c.  An organization may wish to simplify the standard PC setup to the
   greatest possible extent, for ease of configuration, use, documentation, and so
   forth. For example, Microsoft's James Allchin alluded frequently in his March
   1998 deposition to the importance of simplicity in computer configurations:
        Reduce concepts is something that we've been trying to drive
        because of simplicity. It's just too complicated for end users
        and we want to simplify the system. (J. Allchin Deposition,
        3/19/98, 20:9-12.)
 

   My experience is that corporate technology managers do indeed value simplicity.
   Section VI.A of this testimony discusses standardization benefits in more detail.
        d.  An organization may wish to minimize the support costs associated
   with having "extra" undesired software on the typical PC. Those costs include
   answering user questions, troubleshooting software problems, training technicians,
   and so on.
   24. For organizations, it is not always or even generally true that "any browser
will do" just because it comes bundled with a particular operating system. Managers
have expressed a variety of reasons why this is the case.
        a.  Perhaps most notably, an organization with multiple operating
   systems already in use may prefer a particular application because it can work on

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   each of those operating systems, enabling users throughout the organization,
   regardless of the operating system installed on their PCs, to use an organization
   standardized product to access the Internet and/or the organization's Intranet. In
   my interviews over the past two months, some managers (including those at
   Informix, Ford, Federal Express, Boeing, and Morgan Stanley/Dean Witter) have
   stated that their organizations deploy a variety of operating systems and hardware
   platforms, and therefore prefer a browser having greater cross-platform availability
   and compatibility.
  A Morgan Stanley/Dean Witter manager listed several reasons that his
   organization places great value on cross-platform applications: less training
   expense, less testing expense, more effective internal communications via e-mail,
   less application testing, more efficient user services, and lower Help Desk costs.
 

  Scott Vesey of Boeing makes the following comments:
 

        Q:  One of the things that you testified about before was the fact that at
             Boeing there are PCs and workstations that run not only Windows
             but various forms of Unix and in some cases the Mac operating
             system. Is that right?
 

        A:  Yes, that's true.
 

        Q:  Okay. Is it important in your evaluation and in Boeing's ultimate
             choice of browsers that the browser chosen be able to run across all
             of those platforms?
 

        A:  We've seen that as being something that we believe to be
             advantageous. (S. Vesey Deposition, 88:13-22.)
 

   Microsoft executives recognize this preference. As Chris Jones stated in one
   internal memo:

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        Cross platform adoption continues to be a major adoption
        hurdle. Many corporations and ISPs will not deploy our
        products until the cross platform products have shipped. Sim
        [simultaneous] shipping a lower featured cross platform
        product is better than shipping later with more features
 

                       . . . . . . .
 

        What would success look like? Sim ship (         key components on key platforms with a clearly articulated x-
        plat [sic] common, competitive feature set/user interface
        where appropriate/admin and deployment. (Exhibit 364, C.
        Jones memo to IE Project Team (MS7 004717-28).)
 

        b.  Other managers (for example, at Federal Express and Chrysler) have
   told me that they consider the strategic direction of the browser vendor with regard
   to various Internet standards, such as HTML (the language used to format Web
   pages) and Java (a programming language that lets programs run inside a browser
   window), in deciding which browser to adopt.
        c.  Some companies develop their own custom software that only works
   with a particular browser, and compatibility with that custom software may
   provide an ongoing motivation to use that particular browser. (Browsers differ in
   the precise specifications for evolving standards such as HTML and Java. Also,
   Internet Explorer supports a category of programs that go under the name
   "ActiveX," a category which Navigator does not support without extra third-party
   software.)
        d.  Organizations wish to protect PCs against unauthorized programs
   such as viruses and software "Trojan horses." The Internet is rife with such

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   security risks. Different browsers use different methods to provide security, and
   have different security-related characteristics. For example, ActiveX programs
   allowed by Internet Explorer can present a security risk that is different from the
   risk associated with Java programs allowed by Netscape Navigator, because
   ActiveX and Java are two different kinds of programs.
   25. Each of these factors -- wishing to have no browser for some employees;
wanting to standardize on a browser across operating system platforms; considerations of
browser standards and strategic directions; regard for compatibility with other custom
applications; and the need to choose an appropriate security method -- provides an
independent reason why organization managers generally do not want to have their
selection of browser products linked to their operating system decisions.
 

  B.   Receiving PCs and operating systems with no browser preinstalled is
        the preferred mechanism for uncoupling the operating system and
        browser decision; purchasing PCs with an easily removable browser is
        the next best thing.
   26. Generally, the preferable way to achieve a no-browser desktop (if one is
desired for any or all of the reasons set forth in paragraph 23) or to preserve the
maximum flexibility in browser choices (if such choices are desired for any or all of the

Page 21      

reasons set forth in paragraphs 24 and 25) is to receive computers that have no browser to
start with. (See J. Kies Deposition, 9/11/98, 39:3-9; S. Vesey Deposition, 33:4-18.)
   27. If a browser comes on a computer already (e.g. with an operating system)
and the browser can be easily removed, then removing the browser is the next best thing,
although doing so is not without cost. Some additional information on how organizations
buy and configure PCs is relevant to understanding how different organizations achieve
this result:
        a.  Some small and medium-size organizations often buy PCs
   preconfigured with the software that they desire. That is, these companies specify
   an operating system and a list of applications, and the PC vendor loads that
   software ahead of time. If the operating system comes with an application that the
   organization does not want, then it must take steps to remove that application on
   every PC that comes in the door. If, further, the operating system vendor does not
   facilitate the removal of the application, the organization may have to expend
   considerable time and energy determining how to perform the removal.
        b.  Other small and medium-size organizations buy PCs, erase their hard
   drives, and install operating system and application software themselves (for
   example, from network servers configured specially for this purpose). Again,
   however, if the operating system installation also installs an undesired application,
   the organization must do extra work to remove that application.

Page 22      

        c.  Larger organizations often create their own "hard disk image" or
   "standard build" by installing the software they want onto a test PC, configuring
   and customizing that software as they want, and then providing that master hard
   disk (or a tape or CD replica thereof) to the PC supplier. The PC supplier then
   copies that hard disk image onto each PC supplied to the organization, effectively
   "cloning" the customized test PC's hard disk onto all other PCs that the
   organization buys.
   28. Once an organization decides to remove a browser or other application
product (assuming the preferred option of purchasing PCs without the product installed is
not available), the next logical question is what suffices as "removal."
        a.  Consistent with the discussion above of how software is generally
   viewed and defined by computer users, and as was discussed at length in the
   hearing on January 13 and 14 of this year in the United States' consent decree
   case, Microsoft itself refers in numerous documents and articles available to end
   users, and in Windows 95 itself (specifically, the "Add/Remove Programs" utility),
   to the "removal" of Internet Explorer as consisting of removing of the means of
   accessing the program.
        b.  Corporate technical support managers have also frequently told me
   that inhibiting the user-accessible means of access to a software product (e.g., an
   icon on the "desktop" screen of the user interface, or entries in menus of program
   options) has the same effect, from the support cost standpoint, of removing a

Page 23      

   program in its entirety. Indeed, in the case of Internet Explorer, as discussed in
   greater detail in paragraph 40a, many organizations have done exactly this. This is
   a significant consideration because reducing technical support costs is an
   imperative for many, if not all, technology managers. Annual support costs
   typically amount to more than the purchase price of a computer, as studies by the
   Gartner Group and other respected industry analysts have repeatedly shown. My
   own experience and interviews corroborate this finding. For example, Federal
   Express' Managing Director of Technology told me that "Support costs are a
   larger part of the equation above and beyond purchase price." The Director of
   Information Technology for US Steel Group told me that "Support is a big
   problem." Because removing the user-accessible means of using a browser
   product makes the product disappear from the perspective of the user, support
   costs are significantly reduced, and a primary objective of removing the browser is
   achieved. Managers with whom I have spoken (for example, at Morgan
   Stanley/Dean Witter, GE Supply, and Motorola) have corroborated that this is the
   case.
        c.  Nonetheless, if a browser or other application product is designed in
   such a way that its removal leaves a significant amount of code behind, then the
   organization may suffer from unwanted consequences (such as extra disk and
   memory resource consumption) if only the means of access are removed. This,
   along with the costs of removal, is a significant reason why corporate technical

Page 24      

   managers may prefer that an undesired application never be installed in the first
   place. I next discuss the technical aspects of bundling products which give rise to
   this desire.
 

V.   TECHNICAL ASPECTS OF BUNDLING
  A.   Microsoft has designed Internet Explorer so that some of its subroutines
        reside in the same file libraries as other subroutines that are necessary
        for the operating system to function.
 

   29. One of the decisions that software designers make is how to combine the
atomic units of code, called subroutines or functions, to make up files (or "libraries") on
disk. Software designers have great flexibility in this regard. They can create a so-called
"monolithic" program that consists of a single, large file; they can create a highly
modular program that uses a hundred different library files (called DLLs, for Dynamic
Linked Library) to contain a thousand different subroutines; or they can choose any
intermediate degree between these two extremes.
   30. All current versions of the Windows operating system use a large number of
files, containing an even larger number of subroutines. A software designer with source
code access may choose to place an application subroutine into a file that contains
operating system subroutines. As is discussed at greater length in the testimony of Dr.
Edward Felten, Microsoft, for example, has chosen to design Internet Explorer so that
some of the code that it uses co-resides in the same library files as other code needed for
Windows 98 or even Windows 95 to run. As Boeing's Scott Vesey testified:

Page 25      

        So, you know, many applications do make changes in the
        Windows system subdirectory. Fairly few of them make the
        kinds of modifications that Internet Explorer 4 makes. (S.
        Vesey Deposition, 153:21-23.)
 

Microsoft is perhaps in a unique position to make modifications of this nature, as it has
full access to the operating system source code.
  B.   Designing an application so that its code coexists in some of the same
        files required by the operating system does not necessarily deliver any
        benefit, and may in fact present disadvantages, to the customer.
 

   31. The commingling (or "integration," as it is sometimes loosely referred to)
of application and operating system code in this manner is not technically difficult, nor
does it necessarily deliver a benefit to the customer. Dr. Dertouzos, for example, noted in
his deposition that:
        It is relatively easy for a software manufacturer, be they
        Microsoft or Netscape or anybody else, to, in effect, combine
        what the browsers and operating systems do, but in a
        superficial or perfunctory manner, which would make it look
        like it's one happy front end, but in effect, it is the union, the
        addition of the two other worlds. (M. Dertouzos Deposition,
        103:17-24.)
 

   32. In fact, commingling application and operating system code may be
disadvantageous in a variety of ways. I summarize the actual and potential disadvantages
in the subparagraphs below. These drawbacks often constitute additional reasons (above
and beyond those discussed above) why organizations often prefer to purchase and install
operating system and application products, including browsers, separately.

Page 26      

        a.  The likelihood of an application failure affecting the operating
   system may increase when code is shared between the two. For example,
   Microsoft has pointed out (H. Partovi Deposition, 89:21-24) that the failure of a
   browser window could crash the Windows 98 desktop, due to the fact that the
   same file (EXPLORER.EXE) manages both the browser window and the desktop.
   I have noticed in my own experiments with Windows 98 that the failure of an
   Internet Explorer window can cause the entire desktop to malfunction, bearing out
   Mr. Partovi's comments.
        b.  An application that modifies operating system files could create
   (and, in the case of Internet Explorer, has been documented in some cases to
   create) conflicts with other applications and with company-developed applications.
   This concern was a primary reason, for example, that Boeing selected Netscape for
   its fourth-generation browser instead of Internet Explorer (Exhibit 637, 18-Month
   Tactical Plan, 7/14/98 (TBC 000409-411).).
        c.  User confusion can result from combining application code and
   operating system code, for example, as Microsoft has done with Windows 98 and
   the "single Explorer." As Boeing's Scott Vesey stated in his September 30
   deposition: "I have found in some cases that interface to be confusing to the end
   user. They often don't understand the context of what they're looking at." (S.
   Vesey Deposition, 63:23 - 64:1.) That is, whether the computer files being viewed
   are local, or on the Internet, something that is clear when one uses a "Windows

Page 27      

   Explorer" to view local PC resources and a separate "Internet Explorer" to view
   Internet resources. A November 1997 internal Microsoft memo from Brian Hall
   quotes participants in Internet Explorer user focus groups as saying:
        Â…why do we need to see local files through our web
        browser? It's like a whole other version of windows explorer
        in a web browser. Need one or the other, don't need both."
        (Exhibit 218, B. Hall message re: browser focus group
        summary, 11/24/97 (MS7 006352-6354.)
 

Just as some users might find it useful to adopt a "single paradigm" for viewing
information, others -- as Mr. Vesey and Mr. Hall have learned -- do not.
        d.  The required hardware resources can increase significantly when an
   operating system integrates application software. For example, Windows 98
   requires a great deal more disk space and significantly more memory than
   Windows 95, largely due to Internet Explorer software. The fact that Windows 98
   uses some Internet Explorer software to provide an operating system service such
   as a help system may not represent a net benefit for organizations that do not use
   Internet Explorer as the standard browser. The improvements offered by HTML
   Help (and it is not clear to me, based on my own testing, that HTML Help is on
   balance "better" than its predecessor, WinHelp, given that HTML Help is slower,
   less reliable, and lacks an important "hotkey" feature) may not be justified by the
   significant increase in resource requirements.
        e.  It may become more difficult to enforce security when an operating
   system integrates application software. For example, Microsoft provides ways to

Page 28      

   limit what users can do in Windows 95 and 98, but these methods become less and
   less airtight the more Microsoft integrates application software into its operating
   system. In Windows 98, one can restrict access to running a particular browser
   program directly by using Windows' "system policies" security feature, but users
   can still activate the browser indirectly, for example, through a "help" file that
   links to the Web. Securing the system against users running programs that
   management doesn't want them to run becomes more difficult as application
   software is folded into the operating system. As Boeing's Scott Vesey explains:
         ActiveX is the ability to have the Web browser run what
        essentially amounts to local workstation instructions without
        user intervention. In other words, components can be placed
        on a Web page, downloaded, installed, and executed without
        user interaction…The problem with that dependency is that
        you can't rely on training 170,000 people to make accurate
        security decisions on what components should be accessed
        and what components shouldn't. (S. Vesey Deposition, 41:21
          - 42:6.)
        f.  Operating system vendors that integrate applications feel new
   pressure to align, or synchronize, the release of both kinds of products and
   therefore may delay an operating system update in order to include an application
   update. This delay can be disadvantageous to customers eagerly awaiting non-
   application updates to the operating system. As Microsoft's James Allchin put it
   in his March 1998 deposition:
             But we were under massive pressure and IE3 wasn't
             quite ready. So there was a different set of opinions
             about should we satisfy the OEMs and ship that [the

Page 29      

             OSR2 version of Windows 95] now or should we just
             wait and align it with IE3 instead of shipping yet
             another OPK once IE3 was done. So instead of
             shipping multiple of them, this was the idea that we
             would sync them up, which is what eventually
             happened. (J. Allchin 3/19/98 Deposition, 147:8-15.)
 

        g.  Organizations often wish to update applications without making any
   changes to their operating system software. The main reason for this preference is
   that changing operating system software has a greater potential for creating
   problems than changing a single application does, inasmuch as all applications rely
   upon the operating system. The commingling of operating system and application
   code in the updated application can cause unwanted problems with other
   applications still residing on the system, or confusion among users now confronted
   with changes to the operating system. Microsoft has apparently recognized this
   need with regard to Internet Explorer 5. As Chris Jones testified:
        The key is to make our customers to say, hey, I just want to
        go get the latest browsing technologies. I want my start menu
        and task bar to remain the same. (C. Jones Deposition,
        113:12-14.)
 

   33. In addition to these disadvantages, there is an overarching drawback of the
commingling of applications (including browsers) and operating system products: it can
skew users' decision-making about which application to select. To the extent this
disadvantage has taken and will take the form of influencing organizations to select
Internet Explorer as their standard browser when they might not otherwise do so based on
independent evaluation of their options, I discuss it in greater detail in paragraphs 43-45.

Page 30      

   34. Even if organizations continue to select their applications of choice,
notwithstanding the commingling of code, the commingling imposes otherwise-unneeded
costs on that choice. These costs include not only those above, but also the costs of
seeking to circumvent the commingling by removing unneeded application software,
devoting time and personnel to modifying operating system configurations, or using older
versions of the operating system.
  C.   The fact that an application has code that co-resides with operating
        system code does not imply that the application vendor cannot provide a
        removal or "uninstall" feature, such as an entry in the "Add/Remove
        Programs" utility in Windows 95 and Windows 98.
 

   35. An operating system vendor can mitigate at least some of the potential
disadvantages of integration by providing customers the option of uninstalling the
integrated application (or by offering non-integrated options to begin with). The
commingling of application and operating system code does not preclude the developer of
the product from providing customers the ability to remove a bundled application.
        a.  In Windows 95 and Windows 98, users generally add or remove
   software via the "Add/Remove Programs" feature within the Windows Control
   Panel – a sort of master program for controlling the Windows environment. Using
   the "Add/Remove Programs" feature may perform a variety of different actions,
   from the "mere" deletion of a desktop icon (which, as discussed above, may not be
   "mere" at all) to the complete removal of all the code associated with an
   application. The specific actions associated with the removal of each particular

Page 31      

   application are up to the vendor of the application. In any case, the net effect is, at
   minimum, that the program so removed is no longer accessible or visible to the
   user.
        b.  As I have discussed previously in testimony before the Court, in
   Windows 95, Microsoft did not preconfigure the Add/Remove Programs utility to
   enable users to remove Internet Explorer 3.0. However, doing so would have been
   possible, as is indicated by Microsoft's publication of the methods consumers
   could use to achieve this result (specifically, separately installing Internet Explorer
   3.02, which made an entry for Internet Explorer appear in the list of removable
   programs in the utility). Microsoft achieved this result even though IE3
   commingles application and operating system code.
        c.  In the final OEM Service Release ("OSR") of Windows 95,
   Microsoft bundled Internet Explorer 4. Once again, it did not include an entry for
   Internet Explorer in the Add/Remove Programs utility, but could have done so.
        d.  The "Add/Remove Programs" feature is not the only way Microsoft
   has provided for adding and removing software. The Network control panel, for
   example, allows the user to add and remove networking components – again,
   presumably because the demand for these networking components varies from
   customer to customer, and because the forced inclusion of all possible networking
   components would make Windows slower and more memory-hungry than it needs
   to be.

Page 32      

VI.  ADVERSE EFFECTS ON CUSTOMERS OF IE'S INCLUSION IN WINDOWS
  A.   Standardizing hardware and software is important to most
        organizational computer customers for a long list of reasons.
 

   36. Organizations generally want the PCs that their employees use to have
standard hardware and software configurations throughout the organization, to the extent
feasible given the differing needs of different departments and user classes (e.g., design
engineers, bookkeepers, and in-house attorneys), and given the historical evolution of
computing resources within the organization. (Typically, "standard" hardware and
software means products that the organization supports through licensing, testing,
installation, user training, documentation, troubleshooting, and maintenance, and that the
organization either recommends or insists upon.) A design engineer may need some
specialized software (e.g., high-powered workstation operating systems capable of
running technical or scientific applications) that a bookkeeping clerk would not need,
certainly, but an organization would typically try to set up all design engineer PCs the
same way and all bookkeeping PCs the same way. Further, an organization would
typically try to standardize any application software that both design engineers and
bookkeeping clerks use -- such as word processing, Web browsing, or spreadsheet
software.
   37. Many organizations presently must contend with some degree of variability
in hardware, operating systems, and applications. There are a number of reasons:

Page 33      

organizations sometimes merge with other organizations that have used different
computer hardware or software; even within organizations, individual departments may
have not coordinated their computer hardware and software purchasing policies; and in
large organizations, updating software for every user simultaneously is often impractical.
The fact that such variability exists does not contradict the fact that organizations
generally attempt to standardize computer configurations and product mixes to the extent
that they can. Most information technology managers I have discussed these issues with
in my consulting and seminar assignments view the drive towards standardization as an
ongoing effort.
   38. The reasons that organizations try to standardize hardware and software
configurations to the maximum practical extent are many and persuasive. In fact,
standardization has become something of a holy grail for many information services
managers -- greatly desired and justifying extraordinary effort because of the potential
rewards. Standardization provides the following benefits:
        a.  Reduced desktop configuration costs. Companies often create
   standard "builds" for their PCs, that is, standard sets of software including both
   operating system and applications. These standard builds need to work reliably
   and efficiently, and organizations usually test them thoroughly. Organizations also
   often customize each application to work best for the kinds of users and business
   situations that are specific to that organization. (For example, customizing a
   browser program may mean redefining the "home page" that it accesses when the

Page 34      

   user clicks a button that looks like a house.) The more different applications in the
   standard build, the more time, effort, and money is required to test and customize
   those applications.
        b.  Reduced end-user training costs. The fewer different applications
   and operating systems, the less end-user training is required. It is true that
   browsers, as a type of software product, work more similarly to each other than
   many other applications and therefore may require less training than, say, database
   programs. However, different browsers do many things differently. For example,
   users set browser preferences – such as how Web pages should print, how to
   restrict viewing certain kinds of Internet sites, or whether the browser should
   display pictures in addition to text – differently depending on whether they are
   using one browser or another.
        c.  Reduced technical staff training costs. This is a significant cost for
   organizations that provide their own internal computer technical support services.
   Troubleshooting an application requires a knowledge of how it works internally,
   and how to configure its settings, not just how a user works with it.
   Troubleshooting an operating system requires an even greater degree of technical
   knowledge. Therefore, despite the fact that users need relatively little training in
   the basics of using different browsers for simple navigation, technical staff require
   significantly more training to be able to support different browsers.

Page 35      

        d.  Reduced third-party support costs. This is a significant cost for
   organizations that hire out computer technical support services. Such service
   bureaus typically charge higher fees the more applications they are asked to
   support.
        e.  Reduced troubleshooting costs. A well-accepted maxim of computer
   troubleshooting is that the simpler the software setup is, the quicker
   troubleshooting can be. Conversely, the more applications reside on a PC, the
   more complex the software setup is, and the greater the costs that the organization
   must incur when troubleshooting takes more time and resources. As Boeing's Scott
   Vesey stated in his September 30 deposition: "I believe that we save support cost
   and are able to improve the quality of support to users based on setting a single
   product standard." (S. Vesey Deposition, 42:21-23.)
        f.  Reduced end-user confusion. Generally speaking, the fewer different
   programs on a PC, the less is the likelihood of end-user confusion over how to
   productively operate the PC. As Microsoft's Joe Belfiore described:
        And as some number of items on the screen, whatever screen
        it is, increases beyond some number – and it depends on the
        screen and the context – then it becomes more of a detriment
        to a person's ability to use the PC than a positive." (J.
        Belfiore Deposition, 203:24 - 204:3.)

        g.  Increased employee mobility. To the extent that applications are
   standardized across the PCs in an organization, an employee can change PCs (as,

Page 36      

   for example, may be required after assuming a new job) with a minimum amount
   of relearning.
        h.  Increased employee productivity. The fewer different applications
   and operating systems in use within an organization, the less time employees must
   spend learning software products and the more time they can spend using those
   products to do their jobs.
        i.  Reduced computer resource set. The "resource set" is the collection
   of computer resources, such as disk space, memory, and processor "horsepower,"
   necessary to support a given collection of software products. A smaller number of
   applications reduces the required computer resource set, which can not only save
   hardware dollars but also improve the computer's speed.
        j.  Reduced potential for incompatibilities between programs in the
   standard build. The more software you load onto a PC, the greater the potential for
   conflicts and incompatibilities that can reduce the PC's reliability. A PC with one
   program on it should almost never "crash" or freeze up. PCs that have dozens of
   programs on them have more frequent problems.
        k.  Reduced potential for incompatibilities between programs in the
   standard build and programs developed by users. Sometimes, users develop their
   own applications that (if useful and well designed) may spread throughout an
   organization. The development of intranets – internal company networks based on
   Internet technologies – has accelerated this trend. The greater the degree of

Page 37      

   software standardization, the greater the likelihood that such user-developed
   applications can work properly throughout the organization.
        l.  Reduced costs due to volume purchasing agreements. If an
   organization buys 1000 copies of spreadsheet application A from vendor 1, instead
   of 500 copies of spreadsheet application X from vendor 2 and 500 copies of
   spreadsheet application Y from vendor 3, then the organization can likely
   negotiate a better per-unit price. Organizations may consider this issue even for
   applications that are presently "free," because managers understand that what is
   free today may not be free tomorrow. Indeed, internal Microsoft documents
   suggest that this may be cause for concern, even with regard to the previously-
   announced "forever free" Internet Explorer. (See Exhibit 725, B. Chase memo to
   P. Maritz re: "idea" [for possible configuration of Windows 98], 7/19/97, MS7
   005460-62 ("starts getting people to think about everything won't be free" and
   "what do corp and other biz customers do? we are essentially telling them that they
   get it for free and then have to pay if they want the Unified Explorer later.")
        m.  Reduced costs due to licensing agreements. Many software licensing
   agreements assess costs based on number of installed copies of an application.
   (The director of information technology at US Steel Group voiced this as a
   concern, and it is a common issue I hear about in my seminar and consulting
   work.)

Page 38      

  B.   Organizations that want a browser application typically prefer to
        standardize on a single browser.
 

   39. Following from the general and typically strong desire for standard
configurations, organizations that want a browser typically prefer to standardize on one
particular browser. (For example, Ford, Chrysler, John Deere, GE Supply, Motorola,
Informix, Playboy, Florida Department of Revenue, Boeing, US Steel Group, and Morgan
Stanley/Dean Witter.) Some organizations support a dual browser standard, but in my
experience these are in the minority and represent special cases. Indeed, even
organizations that must use two or more browsers (for example, to test how their
organizational Web sites will look when viewed by users of different browsers), tend to
standardize on a single browser for general organizational use. The most common and
compelling specific reasons for standardizing on a single browser include the following:
        a.  Reduced end-user confusion. As I have discovered in my testing of
   Windows 98 and as Microsoft employees have testified (for example, H. Partovi
   Deposition, 73:10 - 75:4), and as Dr. Felten describes at more length in his
   testimony, whether Internet Explorer (which the user cannot conveniently
   uninstall) or a different browser selected by the user is opened when a user tries to
   access the Internet using any of the numerous means included in Windows 98 for
   doing so depends on which means of access is used; some do not respect the user's
   choice of default browser. The typical computer user is unlikely to understand the
   technical reason for that distinction and is likely to be confused by the fact that

Page 39      

   some actions run Internet Explorer, even though the user has chosen some other
   browser as the preferred browser. Corporate technology managers have confirmed
   to me that this specific issue is a matter of concern to them. As a Boeing memo of
   July 14, 1998 indicates:
        Having two web browsers on the desktop will confuse users.
        This confusion will be worse if some web applications require
        Internet Explorer while others require Netscape. (Exhibit
        637, 189-Month Tactical Plan, 7/14/98 (TBC 000409-411.)
 

   Similarly, in a conversation I had on September 2, 1998, the technology chief at
   Playboy stated that "The worst scenario would be if some operations invoked IE,
   some Netscape."
        b.   Security Concerns. Another source of user confusion and
   organizational concern about having multiple browsers may be that different
   browsers use different security models and present different messages to users
   when a potential security risk is detected.
 

        c.  Reduced computer resource set. This is a significant issue with
   regard to Windows 98's forced use of Internet Explorer software regardless of the
   customer's choice of an alternative browser. As a July 1997 Microsoft internal
   memo states: "Windows 98 is inescapably most appealing to the IE user…in
   many scenarios, the 16MB Nav[igator] user will have a much slower experience
   with 98 than 95." (Exhibit 725, J. Roberts memo to B. Gates et al. (MS7 005460-
   62).)

Page 40      

        d.  Reduced potential for incompatibilities between programs in the
   standard build and programs developed by users. As Boeing's Scott Vesey stated
   in his September 30 deposition:
        If we have multiple browsers, we run into a potential problem
        whereby we will have applications that work best if viewed
        by a specific browser product. And that is something that we
        seek to avoid. . . .
 

        I would say probably it's likely that if I told people tomorrow
        that yes, Internet Explorer is standard, we would suddenly
        have a lot more sites with specific dependencies which would
        trigger more people to have more duplicate browser software
        installed, increasing complexity, increasing the amount of
        support requirement that we had, and lowering eventually the
        quality of the support that we can provide, all of which costs
        us more money. (S. Vesey Deposition, 77:19-22; 135:1-8.)
 

        e.  Desire to provide uniform access to organizational Intranets. Web
   pages on an internal intranet may look different when viewed by different
   browsers. As Packard Bell/NEC's John Kies testified:
        Q:  What is the basis for your understanding that it would
             entail more support to have two browsers on there?
 

        A:  Well, generally a company, like they're developing an
             intranet for their own in-house information, will
             understand which browser they're using or the
             company is using to access that intranet. And if they
             had standardized on [Netscape] Communicator and --
             but some of their end users were using Internet
             Explorer, the screens that came up might not work the
             same. So although the products are very similar, in
             some cases Java applets or other items that are tuned or
             customized to one of the two primary browsers don't
             work. So that would be one example. (J. Kies
             Deposition, 33:4-18.

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        f.  Reduced development costs for custom applications. Organizations
   that write their own programs to work with Web browsers (such as, for example,
   an intranet-based expense report system) keep their development costs down if
   they only have to write those programs to work with one browser. (This point was
   made to me by senior technology managers at GE Supply and Morgan Stanley/
   Dean Witter.)

  C.   Another consequence of valuing standardization is that organizations
        value the ability to remove applications that they do not want or use.

   40. Following from the desire for standard configurations, information
technology managers and support technicians typically value the ability to remove
software products that they do not need or use. (This point is supported by conversations
with Citibank, American Stores, US Steel Group, Morgan Stanley/Dean Witter, GE
Supply, Playboy, and Boeing, which, as I discuss below, have all removed Internet
Explorer in one form or another from the PCs they deploy. Even organizations such as
American Stores and GE Supply, which moved away or are moving away from Navigator
to standardize on Internet Explorer, appreciate the ability to completely remove Navigator
from existing PCs and from the "standard build." Organizations particularly value the
removability of software products that could create issues of testing, training, ongoing
user support, security, compatibility, and/or computer resource requirements, if not
removed, as is the case with a Web browser. (Organizations may not generally remove
software products or components that create none, or few, of these issues.)

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        a.  For example, organizations that do not want Internet Explorer have
   accomplished its removal from Windows 95 in various ways, most common of
   which is removing end-user access (e.g., desktop icon, menu entries, executable
   file (iexplore.exe), etc.). Motorola, Informix, GE Supply, and Morgan Stanley/
   Dean Witter, for example, have taken this approach. With certain versions of
   Internet Explorer, Microsoft has provided technical notes on how to accomplish
   removal of such access. In response to perceived corporate demand, computer
   companies such as Dell and Packard Bell/NEC have removed the Internet Explorer
   icon and other end-user access to Internet Explorer from PCs they sell with
   Windows 95. (J. Kies Deposition, 9/11/98, 24:1-10.) This approach, however, has
   costs associated with it.
        b.  Another possible approach is to install the original retail version of
   Windows 95, which includes no Internet Explorer software, as Boeing has done.
   (S. Vesey Deposition, 34:3-13.) However, in that case, the organization would
   either forego or incur additional costs of trying to reassemble various technological
   advances (such as the more efficient FAT32 file system) provided by later versions
   of Windows 95.
  D.   The forced inclusion of Internet Explorer with Windows 98 or Windows
        NT 5.0 forces organizations to either forego new technology, incur the
        costs of supporting two browsers or removing the unwanted one, or
        alter their choice of browsers.
 

Page 43      

   41. The inclusion of Internet Explorer with Windows 98 in such a way that
Internet Explorer cannot easily be removed can cause organizations who do not want
Internet Explorer to question the wisdom of adopting Windows 98. Indeed, some
companies are resisting, or electing not to use, Windows 98 largely or in part because it
would force them to have a two-browser desktop (for example, Chrysler, where the
Manager of Performance and Cost Management stated that two browsers would increase
support costs). These companies' decisions to forego Windows 98 is indicative of some
of the disadvantages of the commingling of Internet Explorer and Windows discussed
above.
   42. However, despite such drawbacks, many customers (depending on their size
or profile) feel strong pressure to use Windows 98 for various reasons, including the
following:
        a.  The organization's customers, suppliers, or clients are likely to use
   it, and business reasons exist to use the same software that customers, suppliers, or
   clients use.
        b.  Windows 98 brings new technological benefits, such as a more
   efficient file system; support for new types of hardware, such as high-capacity
   optical discs; support for specific new hardware devices, such as printers and
   network cards; better control of power-saving features on both desktop and
   portable PCs; Year 2000 compliance; and a number of new and enhanced
   "housekeeping" utilities that Microsoft claims (and I concur) can reduce support

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   costs. (Microsoft's OSR2 version of Windows 95 brings some of the same
   benefits, but, unlike Windows 98, has not generally been available to customers as
   an upgrade for existing PCs.)
        c.  The organization relies on hardware that is being discontinued by the
   manufacturer and replaced by new hardware that doesn't work with Windows 95
   but that does work with Windows 98. (For example, Boeing experienced this
   situation with a network card used in portable computers. I have also often heard
   similar concerns from seminar students and consulting clients with regard to the
   transition from Windows 3.1 to Windows 95.) At some point in the life cycle of
   an outdated operating system, computer hardware manufacturers tend not to
   devote resources towards making their newest products compatible with that
   outdated operating system. Considering that manufacturers also tend to retire older
   products more rapidly than in other industries, one can see how hardware issues
   can become a persuasive inducement to upgrade an operating system – or even a
   requirement to do so, once older hardware products start breaking and must be
   replaced by similar models in current production that demand the newer operating
   system.
   43. If an organization feels pressure to use Windows 98 for one or more of the
possible reasons listed in the previous paragraph, and given that (a) Windows 98 includes
various end-user-accessible means to run Internet Explorer, (b) Windows 98 does not
provide a vehicle to remove those means, (c) Windows 98 does not provide a vehicle for

Page 45      

preventing the installation of, or removing after the fact, the Internet Explorer browser
software (as opposed to simply the means of access to the software), (d) Microsoft
designed certain features in Windows 98 to use browser software specific to Internet
Explorer, and (e) Microsoft designed Windows 98 so that it does not always honor the
default browser choice (all points on which I understand that Dr. Felten is testifying at
greater length), then the organization must either use Internet Explorer as its standard
browser, or incur various costs by using a competitive browser as its standard browser,
due to the fact that the organization now has two browsers on the desktop. Therefore, that
organization's browser decision is influenced by factors other than the merits of the
product.
   44. Particularly with the release of Windows 98 and the impending release of
Windows NT 5.0, some companies are considering changing the standard company
browser to IE primarily or in part in order to avoid the costs of having two browsers on
users' PCs.
  Boeing is a case in point:
 

             The main reasons for moving to Internet Explorer 5.0
             in Q2/3 of 1999 of the 18-month tactical plan are: We
             do not have a choice. . . . The integration between
             Internet Explorer and the desktop operating system
             cannot be fully disabled. . . . Our only choice is
             whether we will install two browsers or just install
             Internet Explorer. (Exhibit 637, 18-Month Tactical
             Plan, 7/14/98, TBC 000409-411.)
 

  American Airlines is moving to Windows 98 and at the same time switching from
   Netscape Navigator to Internet Explorer, in part because it sees some potential

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   benefit to the integration of the browser, but also in part because it recognizes that
   it has no choice but to accept this integration, which it recognizes cannot be
   undone.
 

  At John Deere, the Manager of Technology Integration commented that although
   Navigator is presently the standard browser, the company would probably switch
   to Internet Explorer when it moves to NT 5.0, because he expects Internet
   Explorer to be bundled with NT 5.0 and because the company only wants one
   browser.
 

   45. Early indications from Microsoft and the trade press are that Windows NT
5.0 will integrate Internet Explorer in much the same manner that Windows 98 does. (See
Exhibit 630, Microsoft website titled "Windows NT Workstation 5.0 Beta 1,"
www .microsoft. com/workstation/basics/ntw5/ ntw5overview. asp ("Windows NT
Workstation 5.0 and Windows 98 will continue to have the same Web integrated
graphical user interface.").) It is reasonable to infer that the organizations that express
concern today about Internet Explorer's non-removability from Windows 98 are likely to
express the same concern in the future about Internet Explorer's non-removability from
Windows NT 5.0. Organizations that do not presently concern themselves with the non-
removability issue because they plan to bypass Windows 98 and wait for NT 5.0 may
well become concerned with the issue when they begin evaluating NT 5.0 in earnest.
 

VII.  CONCLUSION
   46. Organizations continue to view Internet Explorer and Windows as distinct
products -- one an application, the other an operating system. Many organizations have
sought to keep these products separate by removing Internet Explorer from Windows 95,

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or by standardizing on an Internet Explorer-free version of Windows 95. Both
mechanisms impose costs on the organizations that undertake them. However, although
some organizations are willing and prepared to incur such costs, in Windows 98 (and
apparently in Windows NT 5.0), these choices are not readily available.
   47. It is clear that the commingling of Internet Explorer and Windows provides
few real-world benefits, and several significant real-world costs and risks, for corporate
customers that do not standardize on Internet Explorer. Microsoft's failure to provide a
mechanism for disentangling Internet Explorer from Windows 98 may compel such
customers to incur these costs and risks.
.

          APPENDIX A - OPERATING SYSTEMS DEPLOYED
                    BY INTERVIEWEES
 

FOOTNOTES

1 The pool of interviewees was selected by the DOJ from the following sources: (1) organizations described by Dell Computer Corporation as having requested the removal of all or part of Internet Explorer from Dell personal computers; (2) organizations which had voluntarily expressed interest in the DOJ's investigation and this litigation; and (3) a random sampling of Fortune 100 companies. To ensure that my questions and analysis was not biased by the manner in which any particular interviewee was selected, DOJ has not informed me which interviewee has been selected from which category. I have not relied solely on these interviews for any conclusion or opinion stated in this testimony. All of the points made by interviewees have been corroborated by all or some of my conversations over the years with corporate technical support personnel; Microsoft documents; my personal experience with Windows and Internet Explorer; and the deposition testimony of other witnesses in this litigation.

2 To the extent that organizations may assess operating system and application needs by reference to factors irrelevant to individual computer users, the aspects of my testimony that focus on these factors pertains only to the former category. For example, while both classes of user need operating system software to run any computer, organizations often require the ability to restrict the functions that novice users can perform to prevent data loss from a novice's mistake. Organizations further often require the ability to restrict the functions that any users can perform, in order to safeguard data, maintain security, and increase productivity. Organizations also value the ability to standardize their operating system software and, for that matter, their application software, for easier testing, troubleshooting, training, and support. Such organizational concerns typically do not matter as much, if at all, to home computer users. This said, many of the principles relevant to organizations' selection of operating system and application products, including browsers, certainly apply to home users.

3 Of the organizations whose managers I interviewed (or whose comments were summarized for me), most utilize Microsoft's Windows operating system products for the large bulk of their employees' desktop computing needs. The information I received on this score is summarized in Appendix A to my testimony.

4 As used here, the term desktop PCs encompasses both general purpose PCs (i.e., those used for office use, including word processing, spreadsheet, and other productivity applications) and "workstation" PCs (i.e., those used for more high-powered engineering or scientific applications).