Europe's not finished with Microsoft

Microsoft's troubles in Europe are far from over, as Neelie Kroes, The EU competition commissioner, has warned. We review the past and future options for Microsoft and the European Commission.

Posted Richard Hillesley at 2:34PM, 24th April 2008

The 80s were the dog-eat-dog days of business. Top of the pile was Microsoft, the biggest and baddest of them all, led by Bill Gates, who invented the computer, the universe and everything.

Gates looked a bit like the nerd on the cover of Mad Magazine, made it to the cover of Time magazine, and was rich and successful beyond anybody's wildest dreams.

The view of Gates and Microsoft from inside the computer industry was more circumspect. PC software looked amateurish and nobody took it too seriously until the cultures began to collide in the business world during the middle of the decade. The affordable desktop computer, which sprang out of an unholy alliance between IBM, Intel and Microsoft, changed the face of computing in the home and in the work place, and for the most part was beneficial to the user, if only because it was cheap and accessible.

Microsoft always took more credit for this revolution than it probably deserved, but had a way of coming out on top, which owed everything to its early dominance of the operating system market for the IBM PC and its clones. From this dominance grew its prominence on the desktop, and the gradual eclipse of its competitors. The question that was always being asked of Microsoft was how much did the company owe its success to the quality of its software, and how much to the ruthlessness of its marketing?

From the beginning Microsoft had a special relationship with the original equipment manufacturers (OEMS), and made this relationship tell. Each innovation on the desktop, each new tool and the company that made it, either fell by the wayside or was assimilated into the Microsoft hive.

In the hive

Compaq had its arm twisted to stop it bundling Apple's Quicktime on the desktop. Internet Explorer, and later, the Windows Media Player, were bundled into the operating system, and given away free, sucking revenues and market share from Netscape, Real Networks and Apple. The squashing of Netscape and the subsequent death of the browser market led to Microsoft's conviction for monopolistic behaviour before the US antitrust courts.

Microsoft added platform-dependent "features" to Java to render Java's multi-platform features redundant, and when that ended up in court, developed the .NET platform, a very successful and popular alternative that reproduced many of the major features of Java with the notable exception of its multi-platform capabilities.

Kerberos, the encryption standard developed by MIT, was extended by Microsoft with the apparent objective of inhibiting interoperability in the workgroup server space and, in the words of Jeremy Allison of Samba: "these changes were treated as trade secrets, patented if possible, and only released under restrictive non-disclosure agreements, if released at all."

During the US anti-trust trials, Steven McGeady, a vice president of Intel, testified against Microsoft, Intel's most important trading partner, asserting that Microsoft intended to "embrace, extend and extinguish" competition by substituting open standards with proprietary protocols, and claimed that Intel had been warned to cease development of its Native Signal Processing audio and video technology, which promised to vastly improve user experience of the desktop - or else Microsoft would bypass Intel and develop Windows exclusively for AMD and National Semiconductor chips. "It was clear to us that if this chip did not run Windows it would be useless in the marketplace," McGeady testified. "The threat was both credible and terrifying."

Microsoft has always had an ambivalent relationship with the concept of interoperability and with the standards that make interoperability possible, tending to view the protocols and data formats it uses as "de facto" standards and "trade secrets" which it is free to "extend" with no obligation to share. This may not always be deliberate behaviour. Where there is a monopoly standards become incidental, an option rather an obligation. This tendency has been at the root of Microsoft's problems in the US and European courts. Microsoft is not being penalised for success, but for shutting the door on competition, and resisting any requests to modify its behaviour.

Into Europe

Microsoft's troubles in Europe began as early as 1993, when Novell complained that "onerous licensing conditions" imposed on OEMs by Microsoft was pushing NetWare out of the workgroup market.

In this market Novell had been the innovator, but Microsoft had muscled a napping, but still relevant, Novell out of the picture. Thus began a long history of litigation which culminated in the 17 September 2007 decision of the European Court of First Instance, which upheld the European Commission's decision to fine Microsoft and uphold the principle of interoperability.

The September judgement came at the end of a ten year case initiated by Real Networks, supported by Sun Microsystems, Novell and others, all arguing that innovative products were being pushed out of the market on the back of Microsoft's monopoly. Over the years each of these litigants withdrew from the case after doing deals with Microsoft worth billions of dollars, leaving the Free Software Foundation Europe (FSFE), the Samba Team, and their allies to fight the case to the finish.

As Jeremy Allison of the Samba Team told Groklaw: "the copyright in Samba is spread across many, many individuals, all of whom contributed under the GNU GPL 'v2 or later', now 'v3 or later' licenses. You can't buy that. There's nothing to sell. There's no point of agreement for which to say 'here are the rights to Samba, we'll go away'. We're in the, some would say unique, some would say unenviable position, of not being able to sell out. We can't be bought."

Much has been made of the Commission's insistence that Microsoft offer a version of Windows without Windows Media Player bundled, and the record fines imposed upon Microsoft. Improbably, some press coverage suggested that the European decision was a blow against innovation and competition. But the fines mean little more than a few pence on the price of Windows to a company as rich as Microsoft. The fines are a penance for Microsoft's prevarications and refusal to comply with the European courts.

The most important part of the judgement was the Commission's insistence that Microsoft be forced to publish the protocols used by Windows clients and servers under "reasonable" and "non-discriminatory" terms.

For this decision to have any meaning it was incumbent upon Microsoft to publish the protocols in their entirety, and to reflect the actual behaviour of Microsoft servers and clients in the real world - without evasion, inconsistencies, broken standards, obfuscations, fees or hidden patents - to comply with the commonly understood meaning of open standards and protocols as they have been implemented by other participants in the computing industry.

Microsoft has complied, with reservations, releasing protocols and data formats free for "non-commercial" use, (which immediately discriminates against competition), and making promises of future interoperability with its products. Unfortunately the promises have come with limitations, and the limitations target free and open source software.

As Thomas Vinje of ECIS, noted: "For years now, Microsoft has either failed to implement or has actively corrupted a range of truly open standards adopted and implemented by the rest of the industry. Unless and until that behaviour stops, today's words mean nothing."

Bursting the bubble

It is worth noting that once Netscape was trounced and Microsoft assumed the monopoly position in the browser market there was a five year gap of no innovation or competition between the release of IE6 and IE7. The subsequent release of IE7 was almost certainly prompted by the rapid rise of the open source browser, Firefox, and was notable for its failure to comply with W3C standards. Domminance of a market by a proprietary monopoly does not encourage innovation.

Throughout the European Commission's proceedings Microsoft claimed that the protocols were proprietary to Microsoft, and talked of protocols that were enclosed in a "blue bubble". Georg Greve, president of the FSFE explained: "The blue bubble was a theory that Microsoft invented in order to justify that it had kept parts of the protocol secret. They said that there's a difference between the internal protocols and the external protocols, if you want to describe them like that. They said that certain protocols that are so secret that they are in this blue bubble, because they had visualized this with a blue bubble, that this could never be shared without actually sharing source code, without sharing how the program exactly works. These protocols were so special that somehow, magically, you had to have the same source code to actually make that work. That was the blue bubble theory. So they said things like, 'HTML is outside the blue bubble, but the things you want us to disclose, that is inside the blue bubble.'"

In the wake of the decision, the US Assistant Attorney General for Antitrust, Thomas Barnett, made the highly contentious claim that the outcome, "rather than helping consumers, may have the unfortunate consequence of harming consumers by chilling innovation and discouraging competition," which drew a clear response from the EU competition commissioner, Neelie Kroes, that it was "totally unacceptable that a representative of the US administration criticised an independent court of law outside its jurisdiction."

In contrast, the American Antitrust Institute noted "the oddity of Barnett's statement" as both Europe and the US had found that Microsoft was "a monopolist which had acted to harm competition, and both insisted on interoperability in framing a remedy," and noted that "the EC has appropriately targeted strategies that would have the effect of deterring investment in innovations that might lead to a reduction of the monopolist's power and new benefits for consumers."

Talk is cheap

As the kerfuffle surrounding MS-OOXML demonstrates, the publication of protocols and data formats is not enough. To become truly universal, proprietary interest must be relinquished, and interoperability frameworks opened up to discussion, contribution and maintenance by third-parties through a neutral party (usually a standards body), and this is something that the European commissioners are beginning to understand.

As the MS-OOMXl kerfuffle has also demonstrated, such processes are highly political, and like the political process, can be influenced and misled.

But for the moment, Microsoft's tribulations in Europe are far from over. The Commission is investigating a complaint from Opera Software demanding that Internet Explorer comply with W3C standards, and one from the industry body, ECIS (European Committee for Interoperable Systems), in which Microsoft is alleged to have "illegally refused to disclose interoperability information across a broad range of products, including information related to its Office suite, a number of its server products, and also in relation to the so called .NET Framework.

The Commission's examination will therefore focus on all these areas, including the question whether Microsoft's new file format Office Open XML, as implemented in Office, is sufficiently interoperable with competitors' products."

In a press conference to announce Microsoft's latest fine, the EU competition commissioner, Neelie Kroes, emphasised that "a press release does not necessarily equal a change in a business practice. And if change is needed... then the change will need to be in the market, not in the rhetoric."

She also said: "There are lessons that I hope Microsoft and any other company contemplating similar illegal action, will learn.

. Talk, as you know, is cheap; flouting the rules is expensive.

. We don't want talk and promises, we want compliance.

. If you flout the rules you will be caught, and it will cost you dear."

Proprietary protocols are anathema to network computing and a deliberate hindrance to innovation and competition in computing environments. Few of the players, or users, maintain the illusion that a Microsoft-only world is either desirable or attractive - and the accusations of ballot stuffing, bribery, and undue political influence that surrounded the acceptance of OOXML as a standard by the ISO has only served to emphasise this reality.