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MS gets EU fine, orders for server info and WMP-free Windows

And the Commission as the monkey on the back of its business model

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As expected, Microsoft was today hit with a record-breaking fine by the European Commission. But although Microsoft is complaining mightily about it, the sum involved will make a negligible impact on Redmond's coffers. Nor, of itself, is the Commission's insistence that Microsoft must offer a version of Windows free of Windows Media Player to PC companies - the effectiveness of the Commission's remedies will lie in the success or otherwise of its requirements on interface disclosure, and of its strictures against "using any commercial, technological or contractual terms" to cripple the stripped-down version of Windows.

In a statement issued today, the Commission concluded that Microsoft "broke European Union competition law by leveraging its near monopoly in the market for PC operating systems (OS) onto the markets for work group server operating systems and for media players." It has therefore punished Microsoft via the fine, and made a number of orders regarding the company's future conduct.

Within 120 days Microsoft is required "to disclose complete and accurate interface documentation which would allow non-Microsoft work group servers to achieve full interoperability with Windows PCs and servers. This will enable rival vendors to develop products that can compete on a level playing field in the work group server operating system market. The disclosed information will have to be updated each time Microsoft brings to the market new versions of its relevant products." This is at least in theory a pretty absolute requirement; Microsoft has to publish whatever it takes in order for rival vendors' servers "to achieve full interoperability with Windows PCs and servers, and it must provide updates where necessary.

This is clearly wider-ranging than simply being required to license relevant technology and/or disclosing what Microsoft says might be adequate information. There is clearly plenty of scope for argument about what is and is not sufficient and what does and does not work, and there are clear questions about how it will be policed. But it seems likely that the Commission will be receptive to representations from, say, Sun and Samba on this front.

The Commission at the moment has not made it clear to whom this disclosure should be made, whether to named competitors or to the world in general. It does however concede that if "any of this interface information might be protected by intellectual property in the European Economic Area, Microsoft would be entitled to reasonable remuneration." So more scope for argument there. It specifically states that the disclosure order does not cover Windows source code. This will presumably continue to be obtainable from the usual warez sites.

The insistence that Microsoft offer a version of Windows free of Media Player within 90 days means that PC manufacturers will have an option of bundling alternatives. This, the Commission hopefully observes, means that "the configuration of such bundles will reflect what consumers want, and not what Microsoft imposes." Gartner takes the view that this will have little impact, and in the near term it's probably right.

As the Commission says: "Available data already show a clear trend in favour of WMP and Windows Media technology. Absent intervention from the Commission, the tying of WMP with Windows is likely to make the market "tip" definitively in Microsoft's favour. This would allow Microsoft to control related markets in the digital media sector, such as encoding technology, software for broadcasting of music over the Internet and digital rights management etc."

At the moment, the simple existence of an alternative is unlikely to be enough to reverse this "clear trend." The interesting part of the remedy therefore has to be the requirement to "refrain from using any commercial, technological or contractual terms that would have the effect of rendering the unbundled version of Windows less attractive or performing."

If aggressively policed this could have the effect of taking the teeth out of any Microsoft efforts to use WMP as leverage via special discounts, 'joint marketing' deals and technological speed-bumps. This is certainly the Commission's intent; it says: "More generally, the Commission is concerned that Microsoft's tying of WMP is an example of a more general business model which, given Microsoft's virtual monopoly in PC operating systems, deters innovation and reduces consumer choice in any technologies which Microsoft could conceivably take interest in and tie with Windows in the future."

That reference to a "more general business model" indicates that the Commission by no means thinks that the Microsoft matter can now be deemed 'sorted.' It has a couple more investigations in the works, and its intent to keep its sights trained on the broader of Microsoft's business practices seems clear.

So Microsoft has a problem, and it's nothing to do with the fine. At time of writing, Microsoft was due to kick off the first of two press calls today on the subject. The company intends to appeal, and will push for a stay of execution pending this. ®

Related link and stories

Commission statement
Microsoft faces 'one per cent' fine
Windows ruling is biggest IP heist in EU history, claims MS
Sun welcomes EC Microsoft ruling

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