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States team against Microsoft

Attorneys general from thirteen states including Florida, apparently intent on blocking the imminent release of Microsoft Corp.'s next version of its Windows software, are preparing a joint antitrust action against the company.

"The decision on our action is imminent, and in my opinion some action is likely," said Connecticut Attorney General Richard Blumenthal. "I think it will be in the next couple of weeks."

While several of the state officials said they would rather act in conjunction with the Justice Department, which has been pressing its own antitrust suit against Microsoft, they are prepared to proceed on their own.

The states intend to act quickly because Microsoft plans to begin shipping the Windows 98 operating system to makers of personal computers in mid-May and to release it to the general public by late June.

The attorneys general refused to say exactly what their suit would charge because the matter is still under investigation. But interviews with officials in all 13 states, as well as three other states that are monitoring the discussions, showed a common interest in preventing Microsoft from using its dominance in personal-computer operating systems to promote the sale of other software products.

And the states' concerns go beyond the integration into Windows 98 of Microsoft's Internet Explorer software for navigating on the World Wide Web _ which has been one of the issues for the Justice Department.

Microsoft's operating system software provides the basic instructions on nearly nine of every 10 PCs sold. And these days, the PC operating system is not only the control mechanism for an individual computer but also a launching pad into the expanding world of Internet commerce. The states worry that Microsoft could use its industry dominance to dictate which other companies have access to this launching pad.

"My concern is that there is in fact very active competition, the possibility of entry by other companies, in this very important area," South Carolina Attorney General Charlie Condon said.

Microsoft spokesman Mark Murray said Wednesday: "At this point the states haven't given us any specific information on their concerns. I would hope they would tell us before there is any legal action so we can respond and try to resolve their concerns."

With Windows 98, Microsoft significantly expands its practice of including other software products as part of the program. For example, in addition to Internet Explorer _ which competes head-on with Netscape Corp.'s Navigator Web-browser software _ Microsoft has embedded in Windows 98 its Web TV software.

Web TV is a Microsoft-owned service that enables people watching television to also surf the Web. As part of its licensing arrangements for Windows 98, Microsoft is said to be planning to offer discounts on the software to makers of PCs if they agree to install circuitry into the computers that would enable them to receive television signals.

Microsoft has long said that its practice of integrating other software products was key to the company's future. After last week's federal appeals court hearing on the Justice Department suit against Microsoft, William Neukom, Microsoft's vice president for law and corporate affairs, said:

"This case involves a fundamental principal for us, the freedom of high-technology companies to continue to innovate on behalf of our customers. Part of innovation has to be integration. We are going to continue to integrate products."

The attorneys general and their aides hope to act in concert with the Justice Department. But several attorneys general said it was important to act before Windows 98 goes on sale because any lawsuit will become significantly more complicated once computer manufacturers begin buying the new program and installing it on customers' machines.

Some suggested they are acting in part because they fear Washington will not act soon enough. A joint suit would probably be filed in federal court, meaning any judgment or injunction would have force nationwide.

"There are significant advantages to coordinating a federal-state action," Massachusetts Attorney General Scott Harshbarger said. "But state attorneys general often have different time frames, and I think as attorneys general we are prepared to move on our own. And we're very close. The time is getting to be right now."

If the states, or Washington, waited to file suit after the release of Windows 98, "the action then would have to include another large set of defendants, the manufacturers," one attorney general said.

Although Microsoft intends to begin shipping Windows 98 to computermakers in mid-May, the company says it has not yet begun pressing the CD-ROM disks on which the software would be sold as a stand-alone product. An early, or "beta," version of the program is already being tested on thousands of computers nationwide.

Murray, the Microsoft spokesman, said blocking the release of Windows 98 "would be costly, disruptive to consumers, destructive to the high-technology industry, and it would undermine the strength and health of the U.S. economy."

The current Justice Department suit charges Microsoft with violating a 1995 consent decree by forcing computer manufacturers to accept the company's Internet browsing software as a condition of licensing its Windows 95 operating system. Justice officials have said they may broaden that action to include Windows 98. They declined to comment Wednesday on the plans of the attorneys general.

One area of concern mentioned by several states was Microsoft's requirement that computer manufacturers set up their machines so that Windows comes up on the screen when the machine is started, or "booted up."

Though all of the attorneys general interviewed described a suit as quite likely, none say they have made a final decision to act.

The other involved states are New York, Ohio, California, Texas, Wisconsin, Minnesota, West Virginia, Illinois and Iowa.

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