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It's the Critics' Turn as Microsoft/EU Case Unwinds

Critics of Microsoft's integration policies had their say this week during European Commission hearings into whether Microsoft is stifling competition.

Since Wednesday, European regulators have been hearing Microsoft's side of the story regarding charges that it used illegal tactics in order to extend its dominant market share for personal computer operating systems into the market for low-end servers.

A 1998 complaint by arch-rival Sun Microsystems to the commission eventually resulted in the charges, which the commission's competition division brought in 2000.

The commission also alleged that Microsoft is illegally tying its Media Player product with its dominant Windows operating system and that the company "may have acted illegally by incorporating its new Media Player product into its Windows PC operating system."

When the allegations were announced in 2000, EU Competition Commissioner Mario Monti said the commission wants "undistorted competition" in the media player market.

"These products will not only revolutionize the way people listen to music or watch videos but will also play an important role with a view to making Internet content and electronic commerce more attractive."

Microsoft's lawyer told reporters Thursday during a break outside the closed-door meeting in Brussels that the company is interested in hearing the issues the EU has raised and is trying to address them.

According to the AP, which quoted "people inside the hearing," Microsoft argued on Thursday, that tying its own Media Player into Windows does not give it an unfair edge over rivals like RealNetworks and QuickTime, the media player that is shipped with Apple Macintosh computers.

Real Networks and Sun Microsystems argued against Microsoft Thursday and were expected to continue Friday, an EU official told internetnews.com. After they conclude their arguments, Microsoft is expected give closing remarks.

From there, the EU is expected to begin deliberating, the spokesperson said, which could come early next year.

If Microsoft loses, it could be fined as much as 10 percent of its global sales. Or, the EU could order Microsoft to allow other player companies on the Windows platform.

Michael Gartenberg, research director for Jupiter Research, said a key issue is defining what is a core part of the Windows operating system and what should be an extension.

"Microsoft believes that Windows Media is the standard for its platform. This is one of the fundamental differences it is having with the EU."

The challenge is whether that integration results in fewer third parties creating applications that work with RealNetworks' Real Player or QuickTime for that matter, he agreed.

"Can a modern browser ship without a media player? The question is, will Microsoft make some concessions and allow other vendors on that space? This is not a new problem. Back in the days before operating systems shipped with TCP/IP clients, people had a good business of selling TCP/IP clients to operating systems."

"Today that's a standard feature in an operating system. The evolution put some TCP/IP client-makers out of business and others had to change their business model," he added. "But no one is suggesting that Microsoft or anyone else should remove TCP/IP from their operating system so someone can sell it as a third-party add on. The sad truth is that many things that were sold as extensions to operating systems become core parts of operating features."

With the EU and Microsoft seemingly far apart on these key distinctions, Gartenberg declined to predict the outcome.

"I suspect it's one of those salutations that's in everybody's best interest to settle," he said. But it's also understandable to some degree that Microsoft might not be flexible about what it can and can't include in its core operating system, he added, "because these are things that are going to drive its success going forward."

Jupiter Research is owned by the same parent company that owns this publication.