South Korea orders Microsoft to unbundle Windows

Guilty again: Microsoft has now been told to offer versions of Windows in South Korea that are free from Windows Media Player and its IM client

The Korea Fair Trade Commission (FTC) has imposed a 33 billion won (£18m) fine on Microsoft and ordered the company to unbundle Windows Media Player from its Windows operating system. The move comes after a lengthy process that found that Microsoft abused its dominant market position in violation of the country's Monopoly Regulation and Fair Trade Act.

The ruling comes less than a week after Microsoft assured a court in the US that its monopolistic days were over. It follows a similar case last year in which Microsoft was found guilty by the European Commission and ordered to offer an unbundled version of Windows here; it was later accused of dirty tricks which included deleting registry items to stop rival media players working with some applications.

In South Korea, Microsoft has been found guilty of violating the Act by tying its Windows Media Player to the Windows server operating system, and its instant messaging program to the desktop version of Windows. Such practices raised the barrier to entry for competing companies, leading to restriction of market competition and obstruction of consumer welfare, said the FTC.

By tying its streaming media products to its operating systems, Microsoft managed to upend the domestic media server market "that had been almost fully preoccupied by RealNetworks and domestic venture companies," and grab more than 90 percent of the market. The shift in market share due to Microsoft tying Windows Media Player to the operating system has been dramatic: from a 39 percent share in December 2000, when Microsoft first tied the player to Windows, Microsoft's share has risen to 60 percent. RealNetworks has seen its market share fall from 39 percent to 5 percent over the same period.

Similarly, Microsoft used its dominant position in desktop operating systems to restrict competition in the IM market.

These practices led to an increased supply of media in the Microsoft format, and of applications that compliment Windows media technology, which in turn led to a raised barrier of entry for the server and desktop operating system market, said the Korean FTC.

Microsoft is now required to unbundle the Windows Media Service from its server OS and deliver two new versions of its desktop OS within 180 days. One desktop OS must be stripped of both Windows Media Player and IM clients, and another may contain those but must also contain links to web pages where competing media players and IM clients can be downloaded.

The FTC said it hopes the remedies will allow digital media software and IM businesses to compete on a level playing field with Microsoft, and restore competition in markets for server and desktop operating systems as well as for streaming media server and player, and IM markets.

Microsoft said it would appeal the ruling. "We were very disappointed with the ruling and will appeal it," Thomas W Burt, deputy general counsel of Microsoft, told Reuters.