EC ruling: careful what you wish for

EC ruling: careful what you wish for

Summary: Unless you have been living under a technology rock, you know by now that Microsoft lost its antitrust appeal. The European Court of First Instance rejected most of Microsoft's arguments.

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Unless you have been living under a technology rock, you know by now that Microsoft lost its antitrust appeal. The European Court of First Instance rejected most of Microsoft's arguments. The court also ruled that they EC went too far by appointing a Microsoft-paid "special master" to oversee Microsoft's compliance, something some pundits tried to spin as a "win" for the company.  I fail to see why. That legal footnote sounds like a technicality, a bit like saying prisoners don't have to pay for their own prison guards.

My thinking on antitrust has evolved considerably since I first broached the subject seven years ago. My response to the American ruling is more reflective of my current thinking on the subject, though today I would say that the conduct prescriptions crafted by Kollar-Kotelly aren't just "acceptable," but are actually quite useful.

The EC also had some conduct regulations, chief among them rules that force Microsoft to document core protocols used in its desktop and server operating systems. In truth, I think Microsoft should have created this documentation irrespective of whether or not antitrust regulators felt it necessary to force them to do so.

I don't think it makes ANY sense for large companies to play lock-up games with protocols anymore. The days when companies or individuals would feed their critical data into black boxes is long past. Computing is simply too critical an aspect of our daily lives, and it is that valid principle which gives rise to demands for more open systems in general, and the open source / free software movement in particular. Every movement is a reaction to something, even if some of its practitioners take their principles to extremes.

Being open doesn't really hurt Microsoft, in my opinion. At a simple level, it is a great internal motivational principle. No company should want its employees to feel "safe" from competition, and historically, Microsoft has done its best work when faced with long competitive odds.

Documentation requirements, however, are likely to spread Microsoft technology to places where Microsoft on its own could not spread it. This is a good thing for Microsoft, as it creates interesting new upsell opportunities in future. That's the "careful what you wish for" aspect of this blog. The EC has just ensured that Microsoft technology will have a much broader reach than Microsoft could ever manage on its own. Will UNIX fans find that they are encroached from ever more sides by Microsoft technology now that the EC has forced Microsoft to make those protocols widely available for everyone to use?

Those are the good aspects of the ruling, though my attraction to them has little to do with whether or not they will actualy change Microsoft's market share. I think they make sense technically-speaking, reducing unnecessary competitive barriers as they benefit the software art. They may or may not change the balance of power in the industry, however, particularly if that dominance has something to do with the peculiarities of software markets.

This is where my "death to antitrust" side comes out, because regulators faced with the fact that their policy prescriptions aren't creating market conditions as predicted in their antitrust labs often do less than rational things.

For instance, take restrictions that mandate that Microsoft must offer a version of Windows free of Media Player. Clearly, this is a restriction that has almost zero effect, as Windows version N has practically ZERO sales. Granted, Windows version N costs the same as the version that ships with Media Player, but are regulators now to decide the "relative value" of new features in an operating system (if you are nodding your head in agreement, then you are now so far off the path of economic rectitude that the concept of "path" no longer exists)?

Besides, the principle underlying this prescription is a bit goofy. Regulators are basically saying that computer evolution should stop at a certain point, mandating that end users be responsible for the addition of new features whether they want to or not, or else allow OEMs to randomize things such that end users aren't sure what base level features they will find on their new computer. One advantage to integrated features is consistency...just ask Apple. Apple's entire "computer as a TV set" business model, where systems loaded with Apple-only features is considered a competitive differentiator, would be torpedoed if they weren't allowed to control integrated features.

Likewise, end user applications are different than the API guts that support them, and I don't think regulators want to rip that out unless they truly want to freeze operating system evolution in amber. When Microsoft first created Windows version N, they ripped out not just Media Center, but the whole media pipeline. That caused Real Networks to scream, as they relied on that pipeline even if they didn't use the user interface wrapper that Microsoft offered in the form of Windows Media Player.

Operating systems will need the ability to offer certain base level services if they are to continue to serve as platforms that evolve to support future needs. That means that messaging architectures, user presentation renderers (e.g. HTML rendering components, even if you don't have the frame in the form of Internet Explorer), media pipelines and other things will need to be included in an operating system if programmers who write atop them are going to be able to have a consistent baseline upon which to build their applications.

That, at least, is the way I see things. The EC, however, doesn't appear to see things that way, and may be using a simple results-based analysis to determine if their policy prescriptions are working. That's a problem, as it's a simple fact that for most of computing history one company has tended to dominate. That makes sense if you understand how software works. Creating a consistent base for application development is hard, but the market naturally wants that as having one creates economics of scale and lowers costs dramatically. Hence, one company tends to dominate, and if it wasn't Microsoft, it would be someone else.

I accept that that dominance can have some negative consequences. Requiring protocol documentation restrictions helps to reduce those consequences, as does preventing big companies from using their market power like a weapon (e.g. restrictive contracts that lock out competitors).

Regulators, however, have to know their limits. They have to understand that their job isn't to shape markets like artists sculpting clay. They can deny large companies the ability to avoid competition through restrictive contracts. They also can ensure that competitors have the information they need to compete.

Beyond that, however, is dangerous economic territory. If regulators knew when to stop, I would be a more enthusiastic supporter of antitrust. Unfortunately, history has shown that regulators rarely know their limits, and the EC has said little that convinces me otherwise.

But I hope to be proved wrong.

Topics: Security, Apple, Hardware, Microsoft, Software

John Carroll

About John Carroll

John Carroll has delivered his opinion on ZDNet since the last millennium. Since May 2008, he is no longer a Microsoft employee. He is currently working at a unified messaging-related startup.

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34 comments
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  • Stepping on third parties.

    When Microsoft integrates capabilities and thus functionality functionality into the operating system, other providers of that functionality are now competing with what Windows users already have.

    The Real complaint involved streaming media specifically. Microsoft has an advantage with streaming present from the moment of purchase, while Real must be downloaded and installed.

    Of course, Real might have made the effort to be as effective at distribution as Flash or Google, and the company might have made a free player most users do not hate. But to consider the issue we have to overlook Real's inadequacies.

    We also have to overlook the EC's stupidity. When the capabilities are restored, the ability to accept streaming media is back in the operating system. Whether an interface is present initially or not makes little difference, because any non-Microsoft interface selected can still use the non-Real capabilities.


    When Microsoft makes the world better for users and developers by adding capailities and functionality, the company gains, users gain, developers gain. But third patrties do lose. And the EU law values competition mindlessly.

    So how could a rational individual clear reasonable space for third parties to continue to provide a product when the world would be better off with severe damage to their business?

    They way I asked the question implies my answer. The damage is very real (pun noticed), but the gain is more significant.

    The EC had a problem with no good solution under the guidelines set by EU law. I think also that the law should be changed to allow for a better case-by-case balance.

    Certainly in light of the threat of crazed bureaucrats like Monti destroying markets in order to "save" them, this would be a better result. Even if Courts would have to intervene constantly to repair the damage.
    Anton Philidor
    • Re:

      [i]They way I asked the question implies my answer. The damage is very real (pun noticed), but the gain is more significant.[/i]

      That's the way I look at it, too. Clearly, Microsoft has a distribution advantage. Then again, they make the leading operating system in the world that benefits from the tendency in software markets to consolidate around one provider in order to generate economics of scale. Destroying those economics of scale "just because" in pursuit of a narrow interpretation of competitive markets is a bad idea.

      I think the Microsoft UI default is important from a consistency standpoint (from an API standpoint, short of stopping OS evolution, there is no alternative but to allow new features to be added). Perhaps a better approach would be a "Microsoft marketplace" that is available from the main page and/or start button and makes it so staggeringly easy to try out alternatives that you'd be crazy not to try it.

      That would certainly meet the intent of the EC, which is to whittle down the distribution advantage. It is IMPORTANT to have a consistent baseline, but that doesn't mean it isn't possible to make choice on Windows much easier for non-technical people. Take advantage of the fact that EVERYONE has the Internet these days to make a really easy system for customization.

      I'm not sure what the proper solution is. Right now, though, complaining about Monti's excesses isn't going to accomplish much, because the European Court of First Instance just gave them its seal of approval.
      John Carroll
      • What if people don't want alternatives?

        When Microsoft was attempting to negotiate a settlement, the company offered to put every possible media player on the desktop and the remainder on a CD. Probably could have been persuaded to include a blinking banner reading "Try These".

        Monti turned 'em down. Of course, he wanted the power to design media out of Windows, so he didn't care which MeiaPlayer people use.

        Or maybe he actually did realize that given all those choices, people would only wonder how to get all that clutter off the desktop. Very few people care about alternatives once a problem is solved, and MediaPlayer solves the problem.

        What would have happened if MediaPLayer had to be selected intentionally? Excess choice - all those players - would probably have brought people to the simplest, the one requiring approval rather than choice.

        Microsoft wins when people don't care. That's a substantial piece of "user-friendly", a substantial cause for the company's success.


        EU law does emphasize competition without regard to what happens to the people and organizations who/which buy the products controlled by whimsical bureaucrats.

        And yes, an aspiring Napoleon can redesign any product in order to make it work less well so that sales are reduced.

        The chances for abuse are so obvious and the power to do substantial damage so obvious, that it seems prudent the EU change its law to allow for judicial review with less stringent crtiteria for granting an injunction.

        As it is, an order to sell a brand of very expensive perfume in a quart bottle shaped like Bozo the Clown could be halted only if the perfumier could prove that he'd be out of business entirely in the years required for the Court to rule.

        The law should at least allow for the assertion of sanity more promptly.
        Anton Philidor
        • Easy if that proven that 95% refuse any type of alternative

          then as Supreme ruler MS Must become a good global citizen and provide Protocol ,compatibility,help even ,support to other since only a small margin are choosing the alternative .

          Failing to do so immense financial penality and imprisonment should be given to the board of direction .....

          but in the same time open-source and other compagny also give everything in return so every body is compatible so neither, you use linux ,apple,bsd, you are all compatible with each other ....... easily and perfectly all protocol and extrension work on each and everyone ...

          You can open .doc on every platfrom if you pay for it you may have MS ofice on all platform if you choose alternative you loose some eye candy but you still can open and exchange .doc and other stuff.....

          Microsoft provide recompile version of there program to other platform and will all see this as the car industry to each it brand you wanna bmw have it , you wanna have all way out have jeep . you wanna ano fuzz no problem no tech no trouble , no cost to repair have a lada

          Open source become the OS of the poor and the people , apple stay the os of artist and musician , windows stay for teh corporation and the those who dont care to have MS big nose everyhwere .simple
          Quebec-french
          • What Monti demanded.

            According to Microsoft, Monti required the protocols which recorded how Microsoft's server software worked. An investment in good software being provided competitors in order to improve them without the R&D costs.

            That the EC was originally allowing Microsoft to charge for the software shows that the company was correct, at least to a degree.

            So this is about confiscation of IP, and not about compatibility.


            By the way, open sourcers have a difficulty paying for IP under the dogma they follow rigorously. So the EC, which is advocating blatantly for open source, is trying to find a way to hand over Microsoft's work without cost.

            The argument the EC decided to use is that the software essential to competitors is useless and so Microsoft shouldn't charge for it. That's contradictory, but even logic applies only with EC permission.
            Anton Philidor
          • well il give that its a bit hard to swallow but then again

            they are in there sovereing right to make and fix law as any country. usa didnt it on numerouos time

            That what come with sovereinty the right to fix the law as you see fix
            Quebec-french
  • Cost and value

    In the blog.
    "For instance, take restrictions that mandate that Microsoft must offer a version of Windows free of Media Player. Clearly, this is a restriction that has almost zero effect, as Windows version N has practically ZERO sales. Granted, Windows version N costs the same as the version that ships with Media Player, but are regulators now to decide the ???relative value??? of new features in an operating system .."

    So lets reverse that. Is it then true that IE has no value? Or Windows Desktop? I am missing something here. If MS will not place a value on an item then is it spending development $ on it? Improving it? Writting new code? This has economic value on it in some degree - it is just MS chose to ignore it.

    Recently a young man got a baseball - retail under $20. IRS (regulators) determined it was not an ordinary ball and so he had to sell it or pay tax on the value they said it was worth. Turns out it was worth more than originally thought. Right or Wrong, the governement can determine cost if it wants to - if the owner claims it is worthless.

    Has MS decided Media Player is worthless here? Seems so, so they gave up the pricing choice.
    Jim888
    • Part of the price of Windows.

      PC's have become cheaper over time, but the price of Windows remains approximately the same. In order to defend continuing the same price - and to encourage customers to upgrade though satisfied with their current version of Windows - the company must keep improving the product.

      The advantages of having media capabilities in the operating system can encourage people to upgrade.

      Also, some improvements make the development process more efficient. With the large expense of developing the software, a change that saves time and effort more than pays for itself.

      So Microsoft does well from the company's "free" products.
      Anton Philidor
      • Or not

        [i]The advantages of having media capabilities in the operating system can encourage people to upgrade.[/i]

        Or discourage them from it. Pamela Jones (of Groklaw fame) relates that what got her looking for alternatives to Microsoft platforms was the inability to remove the Media Player when she was working with confidential materials. The multimedia features were of no benefit whatever and the attached terms were unacceptable to her employers.
        Yagotta B. Kidding
    • Is Safari...

      ...or iChat worthless? No. Apple chose to make it a feature of Mac OS X, and they earn revenue from sales of Mac systems.

      No different than what Microsoft chose to do.
      John Carroll
      • Actually

        They come bundled in the APPLE COMPUTER. You'll find them in hard drive/applications. I really don't know if Apple bundles updates of those apps into OSX if a user chooses to purchase a newer version of OSX, but the originals came on the machine.

        One of my customers uses a Dell at work. He's no computer genius. Every time he plugs the digital camera into the machine he gets this Dell photo app. Dell bundled that into the computer. I believe that HP bundles a similar thing (HP Image Zone?) into their machines. They do that in an attempt to add perceived value to their COMPUTERS as Apple does with their COMPUTERS.
        j.m.galvin
        • And...

          ...you can't get an APPLE COMPUTER from anybody but Apple. Are you saying that Microsoft's bundling decision would be okay if Microsoft didn't have OEMs and chose to make their own computers like Apple does?

          Mac OS X is an operating system that now includes Safari. Windows is an operating system that now includes standard functionality like Media Player.

          I don't see a problem in that per se, though if you want to ensure end users have more choice of parallel options, there are other ways to deal with it.
          John Carroll
          • Yep!

            If MS chose to dump all OEMS and just make their own machines, like Apple, then they could bundle all sorts of other apps too.

            If MS chose that route - forgetting about the antitrust problems - my guess is that you'd see Linux delivered as a fully functioning, easily used and managed OS in no time - from the likes of HP, Dell, etc.

            Server makers would follow a similar route as desktop makers.
            j.m.galvin
          • Where is the magic boundary?

            Apple makes a whole computer. Microsoft makes the software. Am I to avoid shipping a SIP stack with a communications product I am writing just because I want to give a chance to third party SIP stack authors to provide such a stack, or can I, as DESIGNER of my own product, ship with any damn SIP stack I want?

            There is no difference here, except for a double standard.

            And you are right...if Microsoft opted to ditch its OEMs, it would quickly lose market share to Linux, possibly even sinking to levels of other closed-systems vendors who shall remain nameless. That isn't justification not to let them design their own products.

            Document the bejeesus out of things. Don't tell Microsoft what they can or can't ship with its products (lost cause, that, at least in Europe).
            John Carroll
          • john the problem is the monopoly

            apple can do everything they want because they are not a monopoly
            sun the same

            As far a europe goes they are in there sovereing right to choose how business is conduct inside there territories ....

            And yes very country can impose law on compagny with there border . its also the right of the compagny to pack and leave
            Quebec-french
          • Boundaries..

            I think the thing missing here is that MS was told by the EU that other vendors had a complaint about them - right? The complaint was the bundling of this flavor of tool with the OS cut them off from the market. The EU determined that this was a problem and had MS desist. MS complied with the request by un-bundling the offending feature and made two versions of their product - one with and one without.

            They made the marketing decision that the cost was the same. That became the issue here. In essence, they set up the non-added product to fail and the EU called them on it. Too bad.

            This has nothing to do with Apple. Why are we always talking Apple when we talk MS? Apple is a hardware company. MS is a software company (for computing anyway). Why not talk about IBM OS division when discussing MS? Is there a leaning on Apple with its small install base that sticks in someones craw 'cause they can not have it? Is there a vendor out there that can not replace the 3% of users that have Safari because Apple will not remove it from the install group? Last I heard MS dropped its IE for Apple - due to the predatory placement of Safari on the system... wait... they had put full IE on it too...

            This is nonsensical. Stick to the topic. Cost and value. Windows Media Player is worth $0. Why? MS says so. Well that dev cost is a drop in the bucket compared to the other loss leaders in the portfolio.
            Jim888
        • That doesn't make sense.

          A broswer, which is what the OP mentioned, is most definately not hardware, or hardware related, nor is it the OEM that installs it. Browsers are part of an operating system. They are applications, but they are bundled into the OS so people can actually log on without having to go through the old rigamarole that we had to go through before IE, Netscape, etc came out.

          You can't actually belive that the browser has anything to do with the hardware, right? The apps you are referring to, like image zone and the photo app are attached to the hardware that reads such information, such as the card reader or a scanner. A broswer is for serching the internet. It is not at all specific to the individual hardware.

          Apple may be a computer company (something they want you to forget, btw - they did drop the word from their name, you know), but they also produce software. Safari falls under the software portion. No question about it.
          laura.b
  • Who cares?

    [i]Will UNIX fans find that they are encroached from ever more sides by Microsoft technology now that the EC has forced Microsoft to make those protocols widely available for everyone to use?[/i]

    It's not like there's some subatomic particle, the "Redmond" quark or whatever, that attaches to a a technology and intrinsically renders it unredeemably evil. That would be a straw man way beyond tinfoil hat country and into hermetic copper suit territory.

    The only thing wrong with "Microsoft technology" is that a lot of it is like the One Ring: it still serves its true master regardless of where it is. However, that's purely a function of control over the technology in the first place.

    For instance, the FAT filesystem sucks bricks, but it's pretty much everywhere and some of its drawbacks (lack of file metadata such as ownership, for instance) are actually beneficial when it's used as an exchange medium. The only real problem with FAT is when MS comes along years later playing patent troll and declares that the now-pervasive FAT devices have to pay tribute.

    Take away the "remote control" feature and it's possible to judge FAT by its relative merits.

    The same applies to MS network protocols. Once the world actually gets a look at them, they may be worth something other than connecting to MS-controlled desktops. Or not. However, nobody with any sense is going to adopt them except as absolutely required until they are freed of control by Microsoft.

    In which case, those "Redmond" quarks will vanish and go wherever imaginary particles go.
    Yagotta B. Kidding
    • Maybe

      [i]The same applies to MS network protocols. Once the world actually gets a look at them, they may be worth something other than connecting to MS-controlled desktops. Or not. However, nobody with any sense is going to adopt them except as absolutely required until they are freed of control by Microsoft.[/i]

      Then again, if they want to play in the largest software ecosystem in the world, they will need to build in compatibility. That makes the likelihood of Microsoft technology spreading higher.

      Granted, I do believe that publicly vetting this stuff is going to be good for the protocols.
      John Carroll
      • Rephrasing

        [i]However, nobody with any sense is going to adopt them except as absolutely required until they are freed of control by Microsoft.

        <u>Then again, if they want to play in the largest software ecosystem in the world, they will need to build in compatibility. That makes the likelihood of Microsoft technology spreading higher.[/u][/i]

        That's just a rephrase. "Participating ..." is the reason for including support for the protocols; we're not disagreeing there. That's not the same as becoming [u]dependent[/u] on them for other environments, which is simply assuming an unnecessary "balance sheet liability."
        Yagotta B. Kidding