Netscape, DOD at odds over software pricing

In discussions, the Defense Department has not persuaded Netscape Communications Corp.
to change a $50 million software agreement, even though Netscape is now offering its
client and browser free to private-sector buyers.

The Defense Information Systems Agency made a $50 million client-server agreement with
Netscape in September 1997 to let more than 2 million DOD users download the company's
browser and some software. But on Jan. 22, Netscape began offering free downloads of
Netscape Navigator and Communicator Standard Edition to any user.

"The Communicator products which Netscape will now distribute at no cost
constitute a relatively small portion of the overall cost," said Brig. Gen. Gary
Salisbury, DISA's deputy director for engineering and interoperability.

Nevertheless, DOD is examining the impact of Netscape's changed policy and evaluating
ways to accommodate the change before executing any other contractual options, Salisbury

DOD so far has paid about $10 million to provide 235,000 users with Netscape client and
server products. The one-year contract includes options determined by DOD's needs and

"When you look at the DOD licensing agreement for Netscape technologies, the
client was only a small percentage of that to begin with," said John Menkart, a
regional sales manager for Netscape.

"What DOD is really interested in getting is Internet standard-based servers and
network security," he said. "Both those things are clearly still

Netscape's licensing agreement with DISA includes the Communicator client and several
server products for use throughout DOD. But the Communicator client bought by DOD is a
Fortezza-enabled version capable of using either medium- or high-assurance security

Menkart said DOD wants to enhance its Netscape products so it can use Fortezza
cryptographic cards and electronic signature messaging, something an average user might
not want. Netscape charges for Fortezza support, and DOD must pay for it under the
company's agreement with DISA, he said.

Netscape officials told DISA it could sweeten the pot with a free upgrade from Standard
Communicator to Communicator Pro, a chargeable service under the agreement.

"We certainly intend to keep DOD a happy customer," Menkart said. "We'll
work with them if they feel that they'd like some sort of compensation, like an upgrade to
the client."

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