Microsoft verdict has few consumer benefits

25 Mar 2004

UPDATE: Microsoft’s guilty verdict at the hands of the European Union is a political move with few immediate benefits for consumers or PC manufacturers, according to leading analysts with IDC and Gartner. The ruling will be at best an inconvenience for Microsoft, although it may also set a dangerous precedent for the way in which other media player software is supplied together in future.

Commenting on yesterday’s ruling, Andy Brown, programme manager for mobile computing with IDC, said that only one element of the ruling is unequivocal. “What it does say is that you can’t run a monopolistic business. It’s more of a power struggle. The EU is saying ‘we can force you to make these changes to your business practice’; that’s the message it sends out loud and clear.”

Microsoft has been fined €497.2m but although the figure seems very high, it’s a lot less than could have been imposed, Brown said. At one point it appeared that famously cash-rich company might have to part with a far greater amount. David Smith of Gartner called the fine “insignificant”, saying it represents little more than 1pc of the company’s cash on hand.

The question of intellectual property has not been satisfactorily answered, Brown told Much will hinge on the extent to which Microsoft has to share its code with rivals. Within minutes of the EU’s announcement, Microsoft said it would appeal the verdict. “Presumably that will be the part that’s fought hardest”, Brown speculated. “I don’t see that Microsoft will have to share code and why should it? It has invested a lot in research and development. In fact the question is whether it’s justifiable to force Microsoft to reveal code to competitors to produce compatible products,” he said. “This hasn’t been driven by consumers, it’s been driven by competitors in the media player market, so how beneficial could it be?”

In addition, the implications around software bundling are far from clear, Brown added. Microsoft now has to supply two versions of its operating system to hardware manufacturers: one with the Windows Media Player and one without, but as these will be offered at the same price, it is unlikely that manufacturers will opt for the stripped-down version. Forcing Microsoft to do this was “nonsensical”, Brown said.

He expressed concern that the ruling may offer a basis for similar challenges on platforms such as PDAs or mobile phones that are supplied with media player software.

David Smith pointed out that the EU has reserved the right to examine future matters, which could have implications for how Microsoft may supply other programs with its operating system software. “For example, should Microsoft add other functionality to Windows (such as telephony or antivirus protection), will that move trigger EU review and the need for EU approval?”

The five-year investigation has also been overtaken somewhat by events. Since it began, the digital media arena has changed utterly, with a range of formats now available for downloading and sharing music. “Windows Media is one standard for music but it’s not the standard,” Brown pointed out. “It hasn’t stopped people offering other formats.”

Prior to the verdict, Gartner had predicted that the EU’s antitrust ruling would not affect Microsoft or its customers and events since have not made the company change its opinion. “The inability of the EC to come to a legal, fair and impactful ruling doesn’t surprise Gartner,” said Smith. “As with the US antitrust ruling, this case shows that it’s easy to declare Microsoft guilty of holding or abusing a monopoly, but it’s hard to determine remedies. To that matter, Gartner believes that Microsoft’s proposed settlement in this case would’ve better addressed consumer concerns. Microsoft claims to have offered to ship competitors’ media players on a worldwide basis.”

By Gordon Smith