Mr. Chairman, Members of the Committee, my name is Rob Glaser. I am the founder and CEO of RealNetworks, the leading provider of “Streaming Media Software” – that is, computer software that makes it possible to broadcast and receive video and audio over the Internet. In just three years, more than 27 million computer users have used our RealPlayer software to listen to radio and television programs located on tens of thousands of Internet sites all over the world. Major corporations, small businesses, government, nonprofits, families and individuals all use our software.

In the new world of the Internet, it matters less if you are large or small. It matters less if you are one of the gatekeepers of traditional media. If you have a good idea, you can reach an audience of millions. Opportunity is enhanced, free market competition is enhanced, our economy is enhanced. And, I believe, where citizens can use these new technologies to communicate, freedom of speech and democracy are enhanced. RealNetworks has benefited from this process. And I believe products made by RealNetworks, along with those of many other young software businesses, have played an important role in accelerating this process.

I’m here today because I believe Microsoft is taking actions that create obstacles to the freedom and openness of the Internet. These actions taken by Microsoft, unless remedied, will make the computing world less friendly, and less useful, to customers, and will slow down technical innovation significantly. I’m here because Microsoft is taking actions that simply stop our company’s products from working for computer users across this country and around the world. This is not fair play, and it is not fair to consumers. Microsoft asks consumers in its advertisements, “Where do you want to go today?” But if Microsoft continues on its present course, consumers will increasingly be asking, “Is there anywhere I can go except where Microsoft wants me to?”

Before I explain the specific issues that have brought me here, let me briefly explain my background, which you may find relevant.

Before starting RealNetworks in 1994, I spent 10 years at Microsoft. When I left I was Vice President for Multimedia and Consumer Systems. I truly loved working at Microsoft. I learned a tremendous amount, and worked closely with a number of brilliant and energetic people who I greatly respect, including Bill Gates and Steve Ballmer. I made friends to whom I remain close today. And thanks to Microsoft’s broad-based stock option program, like many others I participated directly in Microsoft’s financial success.

I decided to leave Microsoft and pursue my own course just as the Internet was emerging as a commercially viable phenomenon. I still vividly remember the day in July 1993 that I downloaded the Mosaic Web browser and imagined how a brand new medium could be built.

After thinking about the possibilities that the Internet would open up, I set out to build a company that would unleash the power of video and audio over the Internet. RealNetworks’ first product, RealAudio, which we introduced in April 1995, pioneered the commercial market for delivery of real-time audio over the Internet to standard personal computers. The product was an instant hit. Consumers all over the world loved being able to listen to services such as NPR and ABC News whenever they wanted. We soon expanded to video with the introduction of our RealVideo product. Now over 100,000 new copies of our free RealPlayer software are downloaded every day from our website. In fact, more people load the RealPlayer onto their PCs each day than are loading Microsoft’s new Windows 98 operating system.

We have also had great success with Internet broadcasters. Over 80% of the streaming video and audio on the Internet today is based on RealNetworks’ technology. Over 300,000 Web pages deliver video and audio over the Internet using RealNetworks’ products. Our broadcasting customers span over 1000 radio and television stations, including CNN, C-SPAN, and the ABC, CBS, NBC and FOX television networks. One company, broadcast.com, which is solely based on streaming media, and primarily uses our technology, went public just last week and today has a market capitalization of approximately one billion dollars. Step by step, we are turning the Internet into a great new mass medium.

Distributing our products very broadly has been a key part of our success. While Internet distribution accounts for the vast majority of our users, we also have distributed products through other channels. Notably, we have licensed several versions of our technology to Microsoft. In June of 1997 Microsoft not only licensed our technology but also purchased approximately 10% of the shares of our company.

In addition to licensing RealNetworks’ products and investing in RealNetworks, for the past two years Microsoft has had its own streaming media products. This, of course, is Microsoft’s prerogative. We have had competitors since we began our company, and have always found that fair competition keeps us on our toes and results in better products for businesses and consumers.

Our commercial results show that we have thrived in the fast-moving and competitive world of the Internet. In our most recent quarter we reported sales of $15.1 million, an increase of 115% over the same period in 1997. Since RealNetworks went public last November, our stock has more than tripled in value. Microsoft’s own shares in RealNetworks have increased in value by over $100 million.

We are proud of our success, but I do not recount it to show off. I recount it because I want to convey to this Committee my view that energetic startups can thrive where there is free competition. We don’t want special treatment from the government. We do want to be able to compete in an open environment in which our products win or lose based solely on their merits.

Thus, it is with great personal sadness that I report that Microsoft is beginning to inject other factors into the dynamic – using its market power to unfairly impair free competition. Specifically, Microsoft recently released a new product called the Windows Media Player that breaks RealNetworks’ products.

Like our RealPlayer, the Windows Media Player can play audio and video over the Web. Because it is based in part on technology Microsoft licensed from us one year ago, it can play content based on earlier versions of RealAudio and RealVideo – but not the latest two versions of our technology. Although it has an option to do so, Microsoft has chosen not to pay to update its license with us which would allow it to use the latest versions of our technology.

Instead of either licensing our new products or peacefully coexisting with us, Microsoft has instead in effect tried to stop our products from being used. In a number of circumstances where the consumer already had our product, Microsoft’s product in effect breaks our product. As a result, customers of ours -- both customers who downloaded our free RealPlayer and those who have paid for our RealPlayer Plus -- will find their product has ceased working.

In the interest of time we’ll be demonstrating just some of the ways that Microsoft’s Windows Media Player hurts consumers. On our Web site, www.real.com, we’ll be publishing today a more exhaustive description of the problems.

When we became aware of this development, we immediately brought it to Microsoft’s attention. In some minor respects Microsoft has addressed our concerns, but in major respects it has declined to do so. What Microsoft is doing is wrong, pure and simple. It damages our business and reputation. It’s bad for consumers who depend on the quality and reliability of our products. It serves no positive purpose.

Because the Windows Media Player disrupts consumers’ use of RealNetworks’ products today, we are troubled that it can be downloaded over the Internet from Microsoft’s web site. Of even greater concern, Microsoft has stated publicly that it plans to add the product that breaks our product, the Windows Media Player, to its upcoming revision of Windows ’98. This is the equivalent of Microsoft designing its Word software to break WordPerfect or designing its Money software to break Quicken, and then choosing to bundle that product with its Windows operating system.

We welcome innovation and competition from Microsoft. But if Microsoft “breaks” competing products, and especially if it uses its Windows leverage to do so, this harms customers and innovation. There is also a very real risk that Microsoft can use its Windows market power – arising from the fact that virtually all new PCs ship with Microsoft’s operating system -- to try to prevent competitors from using other distribution channels – like the Internet itself – to distribute their products. In effect, Microsoft’s actions send a message: “innovate only in Microsoft-approved ways” – which is unfair and bad for consumers.

Regardless of what happens after today’s hearings, RealNetworks will continue to compete vigorously and fairly to maintain our market leadership. In fact, our clever engineers are already developing a feature in our software that in effect watches for attempts by Microsoft to break our RealPlayer product. When we find that our product has been broken, we will automatically undo the damage. But Senators, I ask you – is this how consumers want us to spend our valuable engineering resources?

In closing, let me be very clear – as a matter of principle, as a matter of public policy, and as a matter of consumer protection -- what Microsoft is doing is wrong and must be stopped.

I hope my friends from Microsoft take the time to listen carefully to what I’m saying. As I mentioned earlier, I loved my 10 years at Microsoft. I have never considered myself a blind “Microsoft basher,” and I don’t now. Microsoft has created some great products. It helped to usher in the age of personal computing, which has wrought profound changes in the world. Microsoft of course has the right to build and market new products.

At the same time, I’m not a blind government basher. I have seen the government play a positive role in fostering competition and innovation. Microsoft grew up in the context of IBM having to separate its operating systems from its computers. The Internet in the U.S. has been so vibrant in large part because of government programs that stimulated the Internet’s early development and growth.

If I had my druthers, I wouldn’t be here today -- instead I’d be back in Seattle helping RealNetworks bring new innovations to the market. But the damage that Microsoft’s actions are doing to consumers -- and the prospect of even further damage if this situation is not remedied – compels me to speak out. I thank the Committee for its attention, and I would welcome the opportunity to answer your questions.