In March of 2004, the European Commission (EC) fined Microsoft $613 million for abusing its power in the European marketplace. Last December, it warned Microsoft that it must provide "complete and accurate interface information which would allow non-Microsoft work group servers to achieve full interoperability with Windows PCs and servers." The EC said that if Microsoft failed to deliver, it would impose an additional fine of $2 million per day. Though the original anti-trust finding against Microsoft stretched back more than 18 months, the EC delayed imposing the additional fines, giving the software giant an opportunity to deliver the documentation in seven steps. The deadline for delivering the final, seventh phase is July 24, but after reviewing what Microsoft has delivered to date, the EC said it was pointless to delay the fines further.
Microsoft, for its part, has said that since it only received the definition of what constituted "documentation" in April, it has complied with the agreement and has already delivered six of the seven phases of the requirements. In an official response, Microsoft general counsel Brad Smith said, "Having received a clear definition of the documentation requirements this April, we already have met nearly all those requirements in just three months. We have dedicated massive resources to deliver high-quality documentation according to the aggressive schedule set by the Trustee and the Commission. We have delivered each of the first six milestones on time and have over 300 employees working around the clock to meet the seventh and final delivery date for this project, scheduled for July 24. It is hard to understand why the Commission is imposing this enormous fine when the process is finally working well and the agreed-upon finish line is just days away."
The issue for the EC is not just receiving the operability documentation, but receiving functioning documentation that is really useful. Microsoft has put off establishing the actual price it will charge for use of the documentation until all of it has been delivered. But the EC's trustee has been reviewing what Microsoft has delivered so far and says that the quality and the value of the current documentation being released can't be judged unless Microsoft first identifies how much it will charge to access it.
Windows XP N
Meanwhile, Windows XP N—the special stripped-down version of Windows XP that Microsoft created for purposes of complying with the EC mandates—has sold very few copies since its introduction in 2005. The XP N editions are literally identical to XP Home and XP Pro with Service Pack 2 (SP2) except that Windows Media Player is missing, along with 186 ancillary files. (To see what Microsoft did, click here.)
Microsoft critics say that European Union (EU) enterprises have few incentives to purchase XP N if there is no documentation to describe how to interact with it. Microsoft, on the other hand, says there is little reason to sustain the effort if no one is interested in buying it.
Now the EC has given Microsoft a real financial incentive that it can't avoid, and with the current schedule for Microsoft's release of Vista continuing to slip, the cat-and-mouse game that the company has been playing with the EC may finally have the company cornered.
Worth the Fight?
Of course, Microsoft said that it will appeal the imposition of the fines, but at some point you've got to wonder why the hullabaloo isn't a bit louder in the United States. Is the EC being unreasonable? Or are the anti-monopoly sentiments in the EU that much stronger than those in the U.S.?
In the past, IBM has faced many similar anti-trust challenges in its long history. The most notable case was U.S. v. IBM, which was filed in 1969 by the Department of Justice (DOJ). That suit alleged that IBM violated Section 2 of the Sherman Act by monopolizing or attempting to monopolize the general-purpose electronic digital computer system market. IBM reached an agreement with the DOJ in 1972 and was restricted from certain activities until 1996, when the suit was finally vacated. Many of IBM's development decisions during that time—such as the purchase of the rights to develop AIX from the UNIX operating system and the decision to outsource DOS—were aimed at shifting liability away from IBM to other companies. Of course, one beneficiary was the small startup company in Redmond, Washington, called Microsoft.
Microsoft's own day in U.S. anti-trust court came in 1995, when the Clinton Administration's DOJ sought $1 million per day against Microsoft for failing to abide by a previous consent decree for its marketing of Internet Explorer. But when the dust finally cleared on November 2, 2001, the DOJ had reached an agreement with Microsoft to settle the case. The proposed settlement required Microsoft to share its application programming interfaces with third-party companies and appoint a panel of three people who will have full access to Microsoft's systems, records, and source code for five years in order to ensure compliance. This agreement ends—after it was extended by two years—in 2007, and, suspiciously, this is precisely the timeframe in which Windows Vista will probably be released.
Altering Corporate Strategies
Critics of anti-trust lawsuits often point out that these lawsuits make little or no difference to consumers of products in rapidly expanding areas of commerce. Let the market decide, they demand. But in IBM's case—and to a certain extent, Microsoft's case—the strategies of industry giants have been significantly altered by such legal actions.
For instance, it's questionable whether IBM would have decided to outsource DOS for the PC or whether it would have chosen to purchase the rights to UNIX had it not feared that it would be dragged into more legal quagmires. Indeed, one wonders if IBM's current embrace of open-source software is a reflection of its real concern for interoperability or simply a hedge against possible anti-trust actions. Certainly, its drive to obtain an increasing number of software patents is aimed at sustaining its legal monopoly on particular technologies. And here too Microsoft is following IBM's lead by beefing up its own pursuit of intellectual property rights through patent applications.
Do Anti-trust Laws Make a Difference to Consumers?
Consider the cost of Microsoft Windows today versus the cost in 1995: The price has changed little, while the functionality has increased substantially.
Is this the solely the result of free-market forces? Or has the need for the appearance of competition kept the price within a certain range of consumer acceptability? Have governmental anti-trust requirements done anything for the consumer? Or would we be paying substantially more (or less) had the anti-trust laws been ignored or repealed?
Quality Is Job X
What about the quality of the products themselves? Windows today is better than it was 10 years ago, though things like documentation are not. For instance, in years gone by, Microsoft actually bundled in a manual describing how to use its products. Of course, these manuals always seemed like an afterthought, often so badly written that consumers seldom cracked the shrink-wrapped package. (It was much easier to call IT or simply tap the shoulder of a more knowledgeable neighbor.)
But what's better than a bad documentation manual? Well, evidently Microsoft interviewed hundreds of consumers and came up with a market-driven answer: No manual is better than a badly written one.
So, today, instead of a manual describing how to use the product, documentation for Microsoft products consists of only marginally useful Help text. Some consumers may complain privately, but the message seldom reaches the ears of the company itself. Instead, consumers pay for telephone support or log onto the Microsoft Web site and wade through Web pages that invariably misdirect, confound, and technically bewilder.
Of course, Microsoft is not alone in delivering documentation in this manner, but isn't it ironic that now the EC is actually fining Microsoft $2 million per day for not adequately documenting the interoperability of its own software? Who do these people at the EC think they are? Consumer advocates or something? What are they trying to do? Make Microsoft accountable? How bizarre! How totally European!
The Man Behind the Curtain
For some reason, this reminds me of the final scenes of the film version of the Wizard of Oz. Toto pulls back the curtain to discover a little old man operating the controls of the so-called Great and Powerful Oz. "Pay no attention to the man behind the curtain!" the old man bellows through the microphone.
I like to imagine Bill Gates playing the role of the wizard. My, how he's aged! And as Bill prepares for his for his ascent into the stratosphere of retirement in 2008, his faithful subjects assemble on the lawn to wish him bon voyage.
In this imagined farewell, I reflect how Windows has transformed the land of Oz. New Windows Vistas will by then stretch around the globe, offering a bountiful future for each of its Microsoft citizens. Bill climbs into the beautiful hot-air balloon while each of us gazes fondly at him through our emerald-colored glasses. The ropes are cut. The wizard ascends.
But wait! Dorothy has been left behind! "Come back!" she cries. "Come back!"
"I can't," Bill calls back plaintively. "I don't know how it works!"
Perhaps this is the scene the EC is worried about, too.
Thomas M. Stockwell is Editor in Chief of MC Press Online, LP.