STEVE CASE ON AOL, THE ONLINE WORLD, AND MICROSOFT

America Online Chairman Stephen M. Case is exhorting the Internet industry to regulate itself lest others step into the breach. The Internet is now "big enough to matter but young enough to be shaped," he says. "In the next five years, the future of this medium will be determined more by policy choices than technology choices."

While the government needs to preserve a level playing field in the online world, Case told a National Press Club audience on Oct. 26 that the industry must maintain control. It can do that by establishing accountability in areas ranging from consumer privacy to parental controls. It must also help bridge the gap between technology haves and have-nots, Case said.

Case declined to address most questions about AOL's involvement in the government's ongoing antitrust trial of Microsoft. But he acknowledged that Microsoft's market power might have figured in AOL's decision to use its Web browser. In 1996, AOL agreed to use Microsoft's Internet Explorer in exchange for prominent placement of the AOL icon on the Windows 95 screen. That deal trumped an earlier agreement by AOL to use Netscape's Navigator.

Of the competing browsers, Case said: "We thought at the end of the day they were comparable. What tilted us in favor of Microsoft was its willingness to bundle us with their operating system." AOL executive David Colburn has been subpoenaed by the Justice Dept. to discuss AOL's choice to use Internet Explorer instead of Navigator. Colburn could testify later this week.

Case confirmed that AOL was seeking alliances with cable and other companies to offer the online service through faster cable-modem and other broadband distribution services. He noted that distribution of the popular AOL via cable modems might help accelerate their adoption. "We've had some discussions with telephone companies and cable companies," he says. "We want to make sure we can provide our members with seamless upgrades to broadband." But Case declined to comment on reports of AOL's discussions with Time Warner Inc.

By Catherine Yang in Washington

EDITED BY DOUGLAS HARBRECHT