February 27th, 2008

European Commission vs. Microsoft: Who is being unreasonable?

Posted by Mary Jo Foley @ 5:17 am

Categories: Corporate strategy, Legal, Linux, Office, Office 2007, Windows Server 2008/ Windows Server Longhorn, Windows client

Tags: Mary Jo Foley

Now we know another reason Microsoft rolled out with great fanfare last week its interoperability principles. Not only was it hoping for one more chance to claim openness around its Office Open XML document format, but it was also hoping to head off another hefty antitrust fine from the European Commission.

On February 27, it became clear that Microsoft’s effort on the EC front was in vain: The EC announced it planned to charge Microsoft $1.3 billion for failing to comply with terms from EC’s 2004 antitrust case. The EC said the new fine (on top of the $1.2 billion it had already charged Microsoft) was for failing to provide competitors access to its protocols at a reasonable price, enabling them to build compatible solutions.

Microsoft officials are still maintaining that last week’s interoperability announcements — which included providing others free access to protocols and lower fees for licensing the patented ones — had nothing to do with any actions or hints of actions on the part of the EC. The timing of last week’s announcements was sheerly coincidental, Microsoft officials are still saying.

Here’s what Microsoft told me late on February 22, via an e-mail interview. The answers are from an unnamed company spokesperson:

Q: Why did Microsoft make this announcement on February 21? Is Microsoft saying that it was purely coincidental that it announced new interoperability measures a week before the OOXML ballot-resolution meeting Geneva? Or was there something happening on the European antitrust front that spurred these announcements?

A: The timing of this announcement is driven by the fact that we know that our customers, IT vendors and open source communities want to see this set of broad reaching changes to our technology and business practices implemented as soon as possible. The comprehensive set of activities apply across six high volume products, and will increase the openness of these products and drive greater interoperability, opportunity and choice for developers, partners, customers and competitors.

Q: Microsoft yesterday said that it will offer companies who want to license its patented IP/APIs/protocols a “very low rate.” Is this new rate lower than what Microsoft was offering before? How much lower?

A: It is generally lower than before.

Q: Microsoft and Samba entered into a complex agreement in December to allow Samba’s open source engineers access to Microsoft APIs and protocols needed to make their products interoperable. Samba paid 10,000 Euros (via a non-profit created by the Software Freedom Law Center) for this access. Will Microsoft be renegotiating its agreement with Samba and/or giving Samba any money back as a result of these new interoperability agreements?

A: PFIF (Protocol Freedom Information Foundation, the Software Freedom Law Center organization), along with the other MCPP (Microsoft Communication Protocol Program) and WSPP (Workgroup Server Protocol Program) licensees, will be contacted individually in the near future to discuss their specific situation in order to address their needs.

Whether or not you believe Microsoft is being forthright about why it trotted out a number of its top execs last week (Microsoft says it was simply coincidental timing; today’s EC announcement says different), the question remains whether the EC is being “reasonable” in levying these new fines. The EC’s contention is that Microsoft had more than four years to make these protocols available in a fair way to Microsoft’s competitors — and without its constant prodding that the Redmondians never would have. Microsoft officials have said it took the company all that time to clean up and publish the first set of protocols (MCPP and WSPP), at a cost of “millions” of dollars.

I’ve had some serious qualms about the EC antitrust case against Microsoft, primarily because I never felt that the EC proved customers were harmed by Microsoft’s actions. It proved, instead, that Microsoft’s competitors were harmed. But I have to say I do agree with the EC that Microsoft was trying to drag its feet as much as possible when it came to providing the promised protocols. Adding insult to injury, Microsoft acted like it made last week’s announcements out of the goodness of its heart, instead of because of the hope it could stave off another big fine.

What’s your take? Who is being more unreasonable here? The European Commissioner for Competition Neelie Kroes or Microsoft CEO Steve Ballmer & Co.?