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Netscape vs. Microsoft

Heavyweights wage billion-dollar battle royal for Internet browser supremacy

by Wade Rowland

© Wade Rowland

The Great Internet Browser War just developed a second front. On Monday, Netscape Corp., makers of the top-rated Netscape Navigator software, wheeled out its three top executives to announce a spin-off company called Navio Communications. Navio will focus on developing what company Chairman Jim Clark called an operating system for the Internet, one that will be scalable across a whole range of appliances from home computers and laptops to cell phones to video game decks to "personal digital assistants" to television sets equipped with black boxes. The idea is to provide a common interface between all of these devices and the Net.

Like a lot of other people, the strategists at Netscape believe that the Internet is fast becoming to the information age what electricity was a century ago to the mechanical age: a source of motive power that can be conducted into homes and businesses where it can be used in a variety of ways by a variety of appliances. Electricity ran toasters and washing machines or whatever else customers wanted it to: the Internet runs computers and in the future will "power" other appliances too. Just as you do with electricity, you will plug into the Internet "grid", and use an appliance to customize the use you make of it. Plug in a washing machine to make clean clothes appear in your home; plug in a computer to make a movie or a university library appear.

In making that vision explicit on Monday, Netscape was merely confirming what is at stake in the battle for dominance in the Internet browser competition between its Netscape Navigator and Microsoft's Internet Explorer, both of which released new versions this month. Netscape, the somewhere between 75 and 90 percent of the browser market, holds the whip hand in setting Internet technical standards, a position Microsoft has long held in the world of PC operating systems with its DOS and later Windows products.

Technical standards are what market leaders use to keep their market leadership, by forcing competitors either to subsist in tiny, nonstandard niches or to abandon competition, accept the standard and pay healthy royalty fees. Who could forget Beta vs. VHS? Accepting a competitor's standard is the business equivalent of castration with a rusty blade, and macho CEO's fight with primal ferocity to avoid it. Microsoft's Bill Gates is no exception.

The world hasn't seen such a significant dog-fight over standards since Edison and Westinghouse went at it in the late 1880's over household electrical current. The Edison Electric Company, soon to be General Electric, had invested millions in developing a system based on direct current or dc. Then, along comes an upstart engineer named Westinghouse who has picked up a bright idea in Europe for a system based on alternating current or ac. Edison had all the cards: political influence, public adulation, deep pockets, huge R&D resources at his Menlo Park, New Jersey invention factory. He had, for god's sake, invented the light bulb!

But Westinghouse had a better idea: ac was simply a superior system. Edison fought with everything he had. He tried mightily to convince the public that ac was too dangerous to be let into the home. He had his staff perform "experiments" after hours in his labs, electrocuting a variety of successively larger domestic animals with ac and leaking the gruesome details to the press. He persuaded the New Jersey legislature to make ac the current of choice in their death-row electrocution chambers. Still, Westinghouse prevailed, thanks to his better idea.

It would be stretching things to cast Netscape founder Mark Andreessen in the role of George Westinghouse and Bill Gates as Tom Edison, however romantic a notion it might be. Still, it's fascinating to watch their respective companies slug it out. As with any spectator sport, enjoyment is increased if you understand the rules by which the game is being played.

In the past year or so the Internet has gone from being a system for linking computers to something much more than that. The Internet is becoming one vast computer. More and more, software developers are writing programs that reside only partly on individual computers: the rest of the program lives on Internet servers. Right now, if you visit an Internet site that boasts animated graphics, the software needed to make them do their thing is partly contained within your Internet browser, but most of it is resident at the site of the animation. Your browser automatically downloads it so that you can view the site.

To anyone using this increasingly sophisticated software (it is built in to both Navigator and Explorer), the Net appears to be a continuously flowing stream of data. If you have the appropriate appliance, you tap into the stream, and turn it into something useful to you, i.e. information. That information can be anything from a movie or music video to stock market quotations or a virtual supermarket. It's really not much different from using electricity to make toast.

For the consumer, there are at least two advantages to splitting software in this way: first, it saves memory space on your computer or whatever other appliance you're using (and memory is expensive); and second, it makes it possible for software companies to give away their products, free, to individual users like you and me. They then make their money by selling the second half of the software, the part that lives on the Net, to Internet service providers. The more they give away free, the more pressure there is on the Internet service providers to purchase the half that makes the free part functional. Netscape used this ploy to snare the lion's share of the browser market in an astonishingly short time when it came out a year and a half ago. Now Microsoft is giving away its Internet Explorer as well.

But there is a much deeper significance. If much of the software you formerly had to store on your computer's hard drive is now resident on the Net, you no longer need an operating system for your own computer so much as an operating system for the other words, a Net browser is what you need, since an operating system is essentially a tool to help your computer find what you're looking for.

Which is exactly what Netscape has been so successful in marketing. Which means that Netscape is really in the operating system business. This is what Netscape has always understood, and what Microsoft has been agonizingly slow to catch on to. For a time, in fact, it appeared as if Netscape was in a position to topple Microsoft from its world-wide dominance in operating systems, if Bill Gates did not wisen up.

Early in the game, about a year ago, Microsoft only dimly understood that the future of the personal computer was somehow tied up with the Internet. It announced that it would develop an on-line service called Microsoft Network (MSN), which would compete with America Online and Compuserve, the big so-called "proprietary" on-line services. Microsoft was busily signing up NBC and Disney and other content providers for what it saw as essentially an old-fashioned television network on the Internet. What's more, to reach MSN, all a Windows user would have to do would be click on an icon on the desktop. The operating system would do the rest. That set the fox among the chickens. The on-line sector of the stock market trembled! Would this be the end of America Online? Critics accused Gate's Microsoft of using its hegemony in operating systems to exterminate on-line competition, by making it so easy to access MSN from the Windows desk top that nobody would use anything else.

Meanwhile, however, the on-line action had moved away from the proprietary services to the World Wide Web. AOL, Compuserve, MSN ... they were all a dead issue. The future was on the Web. And Netscape, as we've seen, had the Web by the throat. Moreover, while Microsoft was diddling with its obsolete ideas for the Microsoft Network, Netscape had figured out this idea of the Net being one big computer, a meta-computer that was in need of an operating system. While Netscape was getting a head start on the actual future.

This summer, Microsoft finally got the message, and it reacted with astonishing speed and agility for such a gargantuan beast. In a series of announcements earlier this month, the company laid out plans to jump into the Internet with both feet. In future, all Microsoft software will be Internet-friendly, with clickable links to Net resources. The newest iteration of the company's Internet Explorer software (4.0) will in fact be an overlay to the Windows operating system that will navigate your computer's hard drive as well as the Internet, seamlessly, using the same interface. In future, Explorer and Windows will be ever more tightly integrated. And Microsoft is promising that whatever it does, its standards will be open and accessible to third-party developers, just like Netscape's.

Microsoft vice-president of sales, Bill Ballmer, confessed in the midst of all this: "The battle with Netscape is probably, strategically, in the long run the most important one for us." Netscape, he now realized, was developing its Navigator browser into a "quasi-operating system". Industry analysts who had been frustrated by Microsoft's seeming inability to react to the Netscape challenge were effusive in their praise of the Microsoft plan: "It's totally right," said Ira Machefsky, senior analyst at Giga Information Group.

With Monday's announcement of Navio, Netscape appears to have trumped Microsoft once again. What was "totally right" yesterday, today seems quaintly dated and lacking in vision.

Meanwhile, there is an historic irony in the fact that Netscape initially stole a march on Microsoft by giving away its software and thus getting big enough fast enough to become the Internet standard. It might be understandable for traditional business people to have trouble understanding this technique: the last thing they're used to doing is handing out their products, free. But it was a young Bill Gates who played a major role in the evolution of the model.

When the first personal computer was put on the market in 1975, a primitive tin box called the Altair, it was Bill Gates and his school mate Paul Alan who wrote a version of the BASIC programming language for it. Until then, you couldn't really do anything with the gadget: programming had to be done in machine language, flipping tiny switches back and forth making 1's or zeros. Gates was still an undergrad at Harvard at the time. Demand for the Altair was so enormous, and the company producing it so ill-equipped to cope, that shipments of BASIC got far, far behind paid-up orders. Altair owners got mad. Then they got even, by distributing pirated copies of Gates' and Allen's BASIC all over the world. They saw this as simple justice. Gates saw it as simple theft.

Gates wrote a widely-published open letter accusing users of pirated software of stealing. It was not well-received in an early, idealistic computing community that held as a basic tenant the idea that software should be freely shared, to promote the common good. This was the beginning of the visceral, often puzzling animosity so many computer enthusiasts feel for Gates and Microsoft. For them, Gates is the snake that spoiled Eden.

Microsoft of course went from strength to strength as personal computing spread like a flash fire far beyond the ranks of hacker and hobbyist. The pirating of Altair BASIC had only whetted the public's appetite for more and more software from Microsoft. It also spurred sales of the computer itself. Better yet, so many people now had Altair BASIC on their machines that it became the de facto industry standard. Against his will and in defiance of his new-found capitalist instincts, Gates had pioneered the new marketing model of getting rich by giving away your product.

Of course it is still far too early to say who will win the contest for the Internet operating system. A month ago, many people were shaking their heads and counting Microsoft out. Then the company has made a seemingly brilliant recovery. And now Netscape is once again seen to have the initiative. Who knows how it will all shake out? Back when Edison and Westinghouse were wrapped in their ac vs. dc struggle it seemed to both sides that control of the operating system meant life or death for their respective companies. Edison lost the battle but his child, General Electric, won the war. The operating system faded into the background and the competition switched to the arena of applications - appliances like refrigerators and toasters and washing machines.

It is in the area of applications or "appliances" that Microsoft is most at home, as the world's leading software manufacturer. This could well be the strength that will allow it to win the Internet war even if it must concede a few initial battles to Netscape.

© 1996 Wade Rowland

The above article was originally published in the Toronto Star newspaper on Aug. 29, 1996.

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photo of Wade Rowland Wade Rowland is one of Canada's most respected literary journalists. He has worked for the Winnipeg Free Press, the Toronto Telegram and both national Canadian television networks: CBC (Canadian Broadcasting Corporation) and the CTV Television Network. Rowland writes and lectures extensively on the new media, ethical issues, and science and technology.

Rowland is the author of a dozen other books including Spirit of the Web, a popular history of communications technologies that was selected as Required Reading for 1997 by The Globe and Mail. Other recent books by Wade Rowland include "Ockham's Razor", published April 1999 by Key Porter Books, and "Galileo's Mistake: The Archaeology of a Myth" published October 2001 by Thomas Allen Publishers. He lives with his family near Port Hope and is a principal in the Internet-based corporation, Blue Cat Design.

Read bio of Wade Rowland.

Wade Rowland is available for lectures and readings. He can be contacted at the Blue Cat Design offices.

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Buy "Galileo's Mistake" online at: Chapters/Indigo Bookstores. Read an excerpt.

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