Belated "Netscape Acquisition" opinion

["Robert Reese" <robert.reese@mindspring.com>]

Dear Jamie, Antitrust list members, and everyone else:
First, please allow me to apologize for taking so long to release this
opinion piece.  I greatly appreciate Jamie giving me permission last week to
release it.

This piece is a response to the then-planned merger of AOL and Netscape,
smack in the middle of the DOJ-MS court battle (currently on recess as of
this writing).  A majority of it has to do with AOL and is not primarily
about Microsoft nor Netscape, per se.  I fear, unfortunately, we will have
plenty to discuss in the months and years to come concerning *AOL's*
increasing market share.  For now, though, the main thought that drove me to
write this at that time was "What if Microsoft actually purchased Netscape
via AOL?".  The implications to me where staggering, and about the only way
I could cope with my limited sociological and economical background was to
flesh out the consequences of AOL's conquest.  Then, ruminate internally on
the possible implications of Microsoft's involvement.  A thinking exercise,
if you will.  It is a little off topic, but hopefully you will find it
equally thought-provoking as I did when I wrote it.

NOTE:  Please bear in mind that this was written on the heels of the
AOL/Netscape merger announcement.  Not everything may be relevant nor
currently topical.  Additionally, it was written with the fear of an
unstoppable fear of AOL - as a dire warning.  However, I have edited the
majority of the AOL stuff to try and maintain anti-trust content.  Anyone
desiring the unedited version, please feel free to write me.  Be forewarned,
though, it is highly critical of America Online.
Robert Reese~
robert.reese@mindspring.com

One last thing... please understand this is my first attempt at writing any
kind of serious opinion.  I am not educated formally in writing; therefore,
I would highly appreciate feedback - both good and bad.  (I wouldn't learn
much from just *good* feedback, would I?  ; )

-----Original Message-----
From: antitrust@essential.org [mailto:antitrust@essential.org]On Behalf
Of James Love
Sent: Wednesday, April 07, 1999 4:10 AM
To: Multiple recipients of list ANTITRUST
Subject: Re: NetscapeMorph II


Robert Reese wrote:
> One final note... back in October, I wrote an unreleased opinion on the
> Netscape acquisition.  With Jamie's permission, I would like to release it
> soon on a website and reference it in a letter to you folks on the list.


 Permission granted! Jamie


--BEGIN--

DID MICROSOFT BUY NETSCAPE?
Can Microsoft be behind the AOL purchase of Netscape?  Given Microsoft's
recent battles, I think it is a likely scenario; the primary reason being
that it helps Microsoft on so many levels.  Netscape is (or was) one of
Microsoft's biggest enemies, and a seeming partner with Microsoft's other
main enemy, Sun Microsystems.  Additionally, Netscape was starting to get
very interested in open-source software.  Netscape has put enormous
resources into Mozilla, and recently invested with Red Hat, a distributor of
Linux.

This new agreement also shows how Microsoft can be "competed" against with
just the right acquisition.  It has very little bearing whether or not
Netscape sold out because of unfair competition, but it does have a bearing
on whom acquired them and why.  If Microsoft was behind the AOL/Netscape
deal, it has successfully damaged the open-source movement by damaging
Mozilla.Org, destroyed a main enemy, and reduced the strength of the other
enemy (Sun) by attrition.  Sun/Netscape were stronger combined than they
were individually.  That is, the whole was indeed greater than the sum of
the parts.

As everyone is saying, this deal does damage to the DOJ case.  If Microsoft
did buy Netscape using AOL as a "middleman", or otherwise convinced or
coerced AOL into purchasing Netscape, then perhaps Microsoft has violated
more laws.  I would be interested in learning what kind of laws and how they
would apply.  What would happen to Microsoft if it were found that they
bought Netscape through AOL?  Hypothetically, of course.  I am in no way
inferring or accusing any company of breaking any laws or engaging in any
improper activities.  (Standard  C.Y.A. disclaimers apply, etc.)


DO YOU *REALLY* WANT AOL?
Sun/Netscape made a wonderful pairing.  However, what Sun is doing within
the AOL / Netscape deal is quite mystifying to me.  I know they are claiming
to help take the "enterprise" to AOL, but how many enterprising people have
had an authentic, every-day AOL experience?

AOL has, apparently, decided to stick with the IE base for now.
Interestingly, the other (potential) player, Microsoft, has yet to say much
of anything at all on the whole, which is quite unusual.  Frighteningly
unusual, for something so very relevant to Microsoft's future.  There have
been many reports as to how AOL could be a competitor, but it has been my
experience that AOL is simply as greedy as Microsoft, and will dance to any
fiddle as long as it gets a piece of the fiddler player's pie.

The real threat to the consumer may lie in the damage AOL might do while
handling sensitive business accounts, as well as having significant control
over web-content.  Control likened to that of censors, restricting various
rights of a large number of people.  Of course, that is an issue for another
list, not this one... and I shall leave this one issue at that, except to
say that there is more than one way to hamper a consumer than just
economics.

On the other hand, with that kind of autonomy, there is little to prevent
AOL from deeming a commercial site as off-limits if it competes with AOL
interests or with one of AOL's alliances.  AOL maintains lists of acceptable
sites, and lists of unacceptable sites.  Again hypothetically, we may soon
see AOL sell spots on such “Acceptable” lists to websites, akin to Amazon’
s(?) big PR blunder of selling Editor’s Choice spots. $5,000 to AOL keeps
you from falling off the "accepted" list, $12,000 plus ad space for being
placed somewhere near the bottom of a "preferred" list, and $200,000 a month
for a premier spot on a "priority" list.  Sound improbable?  Not to me.

THE MICKEY MOUSE CONNECTION
How long before you have to pay-per-view for a site on an AOL controlled
web?  Would you have to buy e-Tickets like you used to at Disneyland?
Ironically, it was a lack of business at the local level in southern
California that convinced Disneyland to give up per-use, content-based fees
in favor of an unlimited per-user pricing scheme.

Disneyland had nowhere the global business impact that AOL now enjoys, and
if it were able to have a global accessibility like AOL has, Disneyland
would have never given up the per-use pay scheme.  It turned out that
everyone around the world benefited from the displeasure of the
prospectively insignificant local economy.  It is also ironic that a result
of the local economy's pressure was that Disneyland grew from the off-season
income, rather than lose money keeping up a closed park.  Disneyland
benefited just as its customers did.

Unfortunately, due to the global nature of the Internet there is no possible
way a small group of people can influence a giant like a Disneyland or an
AOL except through a larger organization.  That is where antitrust comes in.
They are the folks that can wake up slovenly giants, and help the
downtrodden to stand up to these behemoths.  Right now I am imagining the
horrifying thought of an AOL / MSN merger. Anybody want to give some
thoughts on that possibility?

IMHO,
Robert Reese~
rwr@mindspring.com

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