Microsoft Alters Win XP as Antitrust Concession

Rivals scoff at small concessions: swapping icons, giving vendors more options.

Stuart J. Johnston, special to PCWorld.com

The ongoing federal antitrust case might soon make a visible difference to Microsoft customers, after all.

PC vendors no longer have to include Internet Explorer with every copy of Windows. What's more, they can place icons for their own services, such as vendor-branded Internet service, on the Windows XP desktop. The changes are Microsoft's nod to the U.S. Court of Appeals, which ruled in June that Microsoft illegally kept its desktop operating system monopoly through restrictive Windows licenses.

Microsoft will now allow PC vendors to remove portions of Internet Explorer that users see, such as the IE icon--even in earlier versions of Windows, including Windows 98, Windows 2000 and Windows Me. Previously, removing some portions of IE would disable the IE code that other parts of Windows uses. Microsoft will even include IE among the programs you can uninstall using the Add/Remove Programs utility in the Windows Control Panel. And the desktop icon concession is a real switch: Microsoft had previously indicated it would no longer place icons on the desktop, purportedly to reduce clutter and user confusion.

But Microsoft is only going so far: A Microsoft spokesperson concedes the company is not budging beyond removing IE.

Vendors can't similarly yank Windows Media Player or the new Windows Messenger from Windows XP. So PC vendors will not be able to replace those Microsoft components with, say, competitors Real Audio Player and AOL Instant Messenger.

Competitors Unimpressed

Microsoft and some observers hail the changes as a significant step in the right direction. But most analysts as well as competitors view the move as little more than a cynical concession, and a half-way step that Microsoft would have had to make anyway, due to the June 28 Appeals Court ruling.

"At first glance, [Microsoft's announcement] seemed potentially significant until I read the fine print," says Mike Pettit, president of ProComp, an anti-Microsoft organization. "It basically says, 'We're not going to be more dictatorial than today,' even though their current conduct has been ruled illegal."

Microsoft's insistence on retaining its audio player and Windows Messenger--the new all-in-one e-mail, instant messaging, Internet telephony client--is by user demand, responds a Microsoft representative.

"The Windows Media Player and Windows Messenger are something that users asked for," says Shawn Sanford, group product manager for Windows. "When we looked at the [Appeals Court] ruling, they were interested in [Internet Explorer]."

ProComp's Pettit calls that reasoning ludicrous.

"They are taking one product--the browser--where there's no competition left, but everywhere that there is competition, they're saying they're going to keep tightening the screws," Pettit says.

Same Concessions

Indeed, Microsoft's concessions appear to be little more than what the company finally offered to do in order to settle the government's antitrust suit more than a year ago. And, as ProComp argues, for Netscape anyway it may well be too little and much too late.

"Is Microsoft really giving anything to anyone here? I think the answer is No," says Al Gillen, research manager for system software at IDC. "Microsoft has already won the browser war and I doubt if anyone [among the PC vendors] will take advantage of that option."

However, Gillen adds, letting PC vendors place their own icons on the Windows XP desktop may have more impact on users' lives.

Microsoft had planned to eliminate that capability with the release of Windows XP, a move that vendors viewed as crippling to their capability to sell services, such as vendor-branded ISP service. Restoring that capability could help PC vendors make money in markets besides PC hardware, which has recently been all but wrung of profits by increasing price competition.

Back to Court

The June 28 Appeals Court ruling finds Microsoft guilty of monopoly maintenance, notably because of its restrictive contracts with PC manufacturers that require them to bundle IE with Windows. The ruling also threw out the lower court's ruling that Microsoft had leveraged its desktop monopoly to move into adjacent markets, notably the market for Internet browsers.

The appeals ruling remanded back to the lower court the question of whether Microsoft illegally tied IE to Windows. This was somewhat ironic, since a panel of the same Appeals Court had ruled on the same issue three years to the day earlier--on June 28, 1998. The court said then that Microsoft was not guilty of illegal tying if the company could plausibly argue that bundling IE with Windows 95 benefited users, regardless whether the code was interconnected.

Many observers believe the Appeals Court is sending a strong signal to the U.S. Department of Justice to settle the remainder of the case out of court as soon as possible. In that light, many of those same observers see Microsoft's move as an olive branch aimed at kicking off the settlement talks.

Whether the case is settled soon, however, it still appears likely that Microsoft enemies will cite the Appeals Court ruling to push the government to halt the company's October 25 release of Windows XP. Their gripe is Microsoft's continuing refusal to let PC vendors remove Windows Media Player and Windows Messenger and replace them with competing products. That refusal, they say, is tantamount to continued violation of the same portions of Section Two of the Sherman Antitrust Act that Microsoft broke with its restrictive contracts regarding IE in earlier Windows licenses.