For a change of pace in the government's antitrust case against Microsoft, the court was treated to a reading by U.S. District Judge Thomas Penfield Jackson. Today's selection was from an interview in the Washington Post with AOL Chairman Steve Case, who said he had no intention of going head-to-head against the software industry's 800-pound gorilla in the operating-systems business. The government's witness, MIT economist Franklin M. Fisher, said Case's comments were consistent with his own conclusions that only government action could check the software giant. The alliance of AOL, Netscape, and Sun Microsystems "won't seriously threaten Microsoft's monopoly power," he said.

Microsoft disagreed, of course. Outside the courtroom, Senior Vice-President William H. Neukom said the proposed AOL-Netscape merger was "the shot heard round the world. Consumers heard it. The market heard it. The judge heard it." He was referring to a comment several weeks ago by Judge Jackson that the deal could alter competition in the software industry. As it has said since the news of the AOL-Netscape deal broke, Microsoft insists that the transaction proves that the industry is so fast-moving that it can solve competitive problems without government interference.

Fisher says the alliance won't dilute Microsoft's power. He argued that AOL chose Microsoft's Internet Explorer as the service's primary browser because it was more valuable to AOL than Netscape's browser -- and that's still true. "Netscape is not worth more to AOL after the merger than before," he says. Fisher noted that AOL had the option to drop Internet Explorer this year and to use Netscape's Navigator but didn't do so.

CHANGES COMING? Microsoft believes the reason AOL didn't drop Explorer is that Netscape doesn't allow a computer user to stay in an application such as Quicken while using the Internet, while Explorer does. This makes Explorer more attractive to applications companies, Microsoft reasons.

But Microsoft also raised the possibility that this could change. When Microsoft's AOL contract expires in 2001, Netscape and Sun will have a Java-based browser that AOL could use to replace Explorer. That not only could make a big dent in Microsoft's browser business but it also could undermine its power in operating systems. That's because a Java-based browser, which is intended to be compatible with any operating system, would provide an incentive for programmers to develop alternatives to Microsoft's operating system.

Fisher is skeptical that even if this is AOL's game plan, it will work. One reason: Thanks to its operating-system dominance, Microsoft can offer Internet service providers a favorable desktop display on 90% of personal computers, something Netscape and AOL can't match. Java, for the time being, does not seem very likely to become an attractive platform, Fisher said. Whether Sun will be a threat to Microsoft in the long run is unclear, he said. What is clear, Fisher added, is that "if Microsoft is not checked, it will continue to undermine competition."

Microsoft is expected to finish its cross-examination of Fisher on Thursday, Jan. 7. Then, either on Thursday or Monday, the court may go into closed session to discuss Microsoft's pricing of products to computer makers. The move to close the trial is being contested by a group of media lawyers.

By Stan Crock in Washington