By Rachel Chalmers

The merger between America Online Inc and Netscape Communications Corp does not affect the US government’s antitrust case against Microsoft Corp, according to MIT economics professor Franklin Fisher. The trial has resumed in Washington DC, with Fisher back on the stand as the government’s first rebuttal witness. He says that since the case is about Microsoft’s alleged monopoly in the PC operating systems market, and about whether the company engaged in anti-competitive conduct in order to defend that monopoly, the AOL-Netscape merger is irrelevant, since the merged company won’t compete with Microsoft in the PC operating systems market.

In fact AOL won’t even compete with Microsoft in browsers. As a matter of economic analysis it is very, very unlikely to be true that the acquisition will change AOL’s decision to license Internet Explorer, Fisher noted. Indeed, that license was renewed for a further two years in January 1999, well after the merger was announced, and chief executive Steve Case in his deposition reaffirmed AOL’s commitment to IE.

Fisher maintains that AOL bought Netscape for its portal business, not for its browser technology. If that’s the case: Netscape was not bought for an unusual amount of money, he said. He compares the deal to Yahoo’s purchase of GeoCities and @Home’s acquisition of Excite. In both case the acquiring companies already had their own portal businesses, he pointed out. The object of all three mergers was to aggregate eyeballs. In that context, Fisher says, Netscape was acquired, if anything, cheaply.

What if AOL changed its mind and decided to push Netscape’s browser technology after all? I think it’s too late, said Fisher. Microsoft has won the browser war, and Navigator is no longer a threat to Windows as a software platform. Stamping the software out altogether would be a waste of effort, or as Fisher put it: It is not necessary for Microsoft to push Netscape to zero to prevent a platform-shifting event. To drive the point home, Boies asked whether AOL threatened Microsoft’s operating systems monopoly in any way at all. Fisher replied: Nothing in the AOL-Netscape deal affects the PC operating systems market.