The EU: Microsoft's New Taskmaster
|
Today, Microsoft bowed before the EU and took its whipping. Both parties got what they wanted—dominance and submission. |
During a press conference earlier today, European Competition Commissioner Neelie Kroes essentially declared victory over Microsoft, which in a statement also indicated it would not appeal a recent appellate court ruling.
Essentially, the European Commission finally exerted authority—and power—over the world's largest software developer. Microsoft groveled before that authority. Microsoft's humiliation before European regulators is much more about nationalism and consolidation of a single European political and economic entity than it is about competition.
The implications of today's events are staggering, for Microsoft made the unthinkable concession: The licensing of its technology for use in open-source software. No area of dispute had been greater between the European Commission and Microsoft than open-source licensing.
Quick recap: In March 2004, the European Union's Competition Commission ruled that Microsoft violated local antitrust law by using its dominant position with desktop operating systems to gain an unfair competitive position in workgroup servers. The ruling also faulted Microsoft for bundling, or "tying," its media player to Windows. The European Commission fined Microsoft about $612 million, ordered the release of a Windows version without the media player and demanded disclosure of server protocol information.
What followed was a hide-and-seek game between EU commissioners and Microsoft lawyers about compliance with the ruling. Microsoft seemed to be playing for time, hoping for reprieve in its appeal to the Court of First Instance. But in a stunning defeat, the European appeals court ruled against Microsoft, in September.
The European Commission and Microsoft jousted mainly over the disclosure of interoperability information, with two main areas of contention: royalty licensing fees and licensing of Microsoft technology for use with open-source software.
Kroes Has Her Day Say
In this morning's press conference, Kroes said that she told "Microsoft that its royalty fees were too high for patents they claim are applicable to the interoperability information." Kroes said that Microsoft has changed its fees "for a worldwide license, including patents, from 5.95 percent to 0.4 [percent]. So now we are sticking to less than 7 percent of the royalty originally claimed."
See eWEEK slideshow: "EU Antitrust: A Case in History"
From one perspective, Microsoft might as well give away the technology for free, given the low royalty fees. From another viewpoint, Microsoft is licensing the interoperability information as penalty/remedy for violating European antitrust law. Lower fees make licensing easier.
"I also told Microsoft that it had to make interoperability information available to open-source developers," Kroes said during today's press conference. "Microsoft will now do so, with licensing terms that allow every recipient of the resulting software to copy, modify and redistribute it in accordance with the open-source business model."
This is the concession I thought Microsoft would never make—that the company would endure endless fines before giving in on this point. Gulp, I was wrong.
Microsoft's approach to software licensing is philosophic, going back to the early PC days when a young Bill Gates chided other developers for essentially stealing other developers' software. Software licensing is the core of what is Microsoft—that the company lets third parties pay to use its products. Microsoft retains all rights and safeguards access to its source code. From Microsoft's perspective, its licensing model compared to open source is like matter and antimatter. The two can never mix. Yet mix they must to comply with the EU ruling.
The European Commission wrought from Microsoft something it would never willingly give up: Licensing its technology for use in free, open-source products. The devil is in the licensing details, so to speak, and they seem to satisfy the European Commission. Still, I wonder about those details and how Microsoft will reconcile its patented technology with the GPL.
"Put together, these changes in Microsoft business practices—and particular towards open-source software developers—will profoundly affect the software industry," Kroes said. "The repurcussions of these changes will start now and will contine for years to come."
Kroes can gloat and make such a bold claim, but I'm skeptical about the long-term benefits for open source. Microsoft now offers a fairly integrated desktop-to-server stack. Licensing of the protocol information should make it easier for other developers to offer more integrated software and solutions that work with Microsoft stuff. But the open-source community has failed to deliver viable alternatives to Office and other desktop productivity software. The open-source desktop-to-server stack is incomplete, and there is little in the licensing program that would fix the problem.
"Now that Microsoft has agreed to comply with the 2004 decision, the company can no longer use the market power that it derives from its 95-percent share of the PC operating system market and 80-percent profit margin to harm consumers by killing competition on any market it wishes," Kroes claimed.
She makes a hallow claim. Microsoft's Windows Market share has changed little since before the 2004 ruling. There is no indication the imposed anti-trust remedy will significantly reduce Windows dominance.
A Humbled Microsoft
Microsoft's concessions almost certainly have to do with its decision not to appeal the adverse appellate ruling. In a statement released today: "We will not appeal the CFI's decision to the European Court of Justice and will continue to work closely with the Commission and the industry to ensure a flourishing and competitive environment for information technology in Europe and around the world."
The statement acknowledged that, following the appellate ruling that "Microsoft committed to taking any further steps necessary to achieve full compliance with the Commission's decision. We have undertaken a constructive discussion with the Commission and have now agreed on those additional steps."
As I blogged in September, there was a certain finality to the appeals court ruling. But the ruling—and the 2004 one before it—stank of nationalism and anti-American sentiments on the Continent.
Microsoft is a symbol of American cultural and economic dominance. The company's software is pretty much used everywhere. Kroes statements during today's press conference indicate that the European Commission got what it wanted most from Microsoft: submission; there is no higher authority than the government's ability to decide.
I experienced this authority firsthand today. Access to the MP3 of Kroes' press conference required registration with the European Commission press site. I chose the password, but the European Commission assigned the user name. I had no choice of a user name that might be personal or easy to remember.
The European Commission has humiliated Microsoft, and that's nothing to cheer. Other American companies—how about Apple and Google, for starters—should watch their backs, too. The EU wants to establish its national and economic identity and authority.
As for Microsoft, there is finality. Kroes' statements indicate that the European Commission is satisfied with Microsoft's compliance with the anti-trust remedies. The company can reach closure on the European drama and move forward. The beating spanking in Europe might be enough to satisfy some other government agencies or some of the organizations or competitors crying anti-competitive foul.
Then again, competition by litigation is a cheap strategy when government agencies such as the European Commission carry the burden.
Related Posts:
- What Microsoft's EU Ruling Means to You, Microsoft Watch, September 19, 2007
- EU Ruling: A Reporter's Notebook, Microsoft Watch, Sept. 18, 2007
- The European Drama Unfolds, Microsoft Watch, Sept. 17, 2007
- Microsoft Employees React to EU Appeals Decision, Microsoft Watch, Sept. 17, 2007
- Microsoft's Stunning Court Defeat, Microsoft Watch, Sept. 17, 2007
- Microsoft's Antitrust Cases Stand in Judgment, Microsoft Watch, Sept. 10, 2007
- Did Microsoft's Consent Decree Benefit You?, Microsoft Watch, Aug. 31, 2007
- Search This, Google!, Microsoft Watch, June 26, 2007
- Microsoft Will Modify Vista Search, Microsoft Watch, June 20, 2007
- And There Was One, Microsoft Watch, March 8, 2007
- Microsoft Competitors' 'Wow' Moment, Microsoft Watch, Jan. 26, 2007
- Microsoft Resubmits Technical Documents to the EU, Microsoft Watch, Nov. 23, 2006
- Microsoft's Antitrust Control Problem, Microsoft Watch, Nov. 22, 2006
- Who You Gonna Call? Trustbusters!, Nov. 17, 2006
- Interoperability: Is Microsoft All Talk?, Microsoft Watch, Nov. 15, 2006
Comments (11)
It was not as if MS did not do what the EU wanted them to do. The EU did not like what they did even if it was along the line of the 1994 settlement. Therefore they pushed asked to make further changes and that was the up front cost which is now $14,300 the royalties which is now .04% from 5%.
"Other technology companies using this information will only have to pay a $10,000 ($14,300) one-off fee rather than a percentage of revenues from any software developed as a result. Also, the EC imposed lower royalties for other uses of the software, reducing it from 5.95 per cent to 0.4 per cent."
This whole concept is not black and white thinking. It is not an all or nothing. MS did something instead what people think. Was it the so called hide and seek game. What they did was release something and came out with the IP web site (www.microsoft.com/about/legal/intellectualproperty/default.mspx)
So the change is still not what may many want and may not meet the FREE requirement for the FREE open sources community. It is now cheaper, but not FREE.
But will open/free software now participate, even though they will still have to pay? When will it stop when there is no up front cost and a royalty free licensing? When and where does it stop? Is this good enough or do we need to beat them up some more? All of you holding out are you now going to MS to make those deals now that the settlement is here. Would that add cost that would then be difficult to give way software for FREE. Could someone tell me again how do I make a living off FREE software? Ohh supporting the software got it?
Posted by some one | October 22, 2007 4:19 PM
Some one: You criticize "Open Source" without so much as the most elementary knowledge of what it is. "Free" most assuredly does NOT refer to cost--never has, never will. To be sure, there are zealots among the Free (as in "freedom") and Open Source community that believe ALL software should ALSO be costless, but it is telling that the most popular distributions of Linux are those which must be purchased. For your information, most, if not all, of these already distribute proprietary code. You also seem to think that the GPL is the only Free an Open Source license. Much of Microsoft's closed and proprietary code (legitimately) incorporates the work of the Free and Open Source community and, in fact, would not even be possible without BSD--Free and Open Source, and also costing Microsoft nary a cent under the BSD License. What is different is Microsoft finally promising to give back to the community that has made its rich success possible! Maybe you have not figured out a way to make a living without closed source, but others have, and it is not all through supporting software (Even if it were, far more people earn their livings supporting Microsoft's closed and proprietary software than supporting Free(dom) and Open Source. If Microsoft doesn't needs so much less support, then why does every non trivial application of its software require an IT department???).
Microsoft's licensing fees may or may not be exorbitant, but that should be for the market, not the government, to decide. This tiny part of the market has decided that they are, but I respect the rights of other parts to decide otherwise. The EU's decision is the opposite of freedom and nothing for the Free(dom) and open Source community to cheer.
Posted by misterpinball | October 22, 2007 7:43 PM
EU hammers Microsoft just because EU member countries do not have one software giant equivalent to Microsoft.
EU feels that uts position in software industry is threaten by Microsoft
Posted by John | October 22, 2007 8:07 PM
misterpinball
Your statement "but it is telling that the most popular distributions of Linux are those which must be purchased".
Can you please explain more regarding this comment.
What are the differences between them ?
Posted by Neil | October 22, 2007 8:10 PM
Why is software called "FREE" if it is not "FREE", and is free good enough when compared to "Not Free" ??
Posted by Neil | October 22, 2007 8:13 PM
Are you serious? You're example of the EU Commissions authority is that you couldn't assign your own username?
As for it being nothing to cheer - well as someone who wants to one day make money from programming i think the devalueing open source movement is nothing to cheer, but the ruling against Microsoft sure is. And if Apple or Google or frigg-knows-who uses unfair and damaging tactics like Microsoft have to gain entry into other markets or baloon marketshare in existing ones - then yes they should watch their back, and yes it's STILL something to cheer.
It's such an american opinion to cry "Nyyaargh they're being anti american, they're threatening our way of life!". C'mon Joe, what's next - The War on Fair Trading Practices? Will I browse to CNN and be told that the EU is now the Axis of Evil? From a very high-level perspective, is it really a co-incidence that Microsoft got into trouble with the EU for bundling(messenger-wmp)/tying(server/windows client) products; and just about the same thing happened with the DoJ and Supreme Court in these your United States of America?
Like i said - are you serious?
Posted by Eric | October 22, 2007 11:37 PM
Neil said: Why is software called "FREE" if it is not "FREE", and is free good enough when compared to "Not Free" ??
Because FOSS is FREE (as in liberated; unshackled; you have the FREEDOM to modify and share).
But I think you already know that. You are probably asking a rhetorical question, engaging in the kind of idiotic FUD that Micro$oft is known for.
Hmmm... Considering the blind, mindless allegiance to Micro$oft we see from the M$ fanboys, that may not be farfetched.
Posted by Maddog | October 23, 2007 1:06 AM
The three most popular Linux distributions are arguably: Red Hat (Fedora, Red Hat Enterprise Linux, and the community version callede CentOS); Novell's Suse, and Ubuntu.
Red Hat doesn't really sell RHEL. It sells a service agreement. The community version of RHEL can be downloaded for free (www.centos.org). Same with Fedora (which is a cutting-edge distribution containing new -- even beta stage -- programs). Fedora is sort of a user test bed for RHEL. When programs become stable enough for Red Hat, they go into RHEL.
Ubuntu can be had for free too. Canonical once shipped me 15 copies of it when I only asked for one!
What's the difference between the "purchased RHEL" and freely available CentOS? The Red hat service agreement, for one. The other is that CentOS has removed the Red Hat branding. CentOS, however, is the same software as RHEL.
I haven't used or read up too much on Suse.
So there really isn't much of a difference between the free and "purchased" distributions, at least not for Red Hat (Ubuntu is free). The main difference is really in the service agreement. That is the case for most instances of Linux.
Posted by Maddog | October 23, 2007 1:20 AM
Maddog, your understanding of Redhat is quite shallow. I don't you are a decision maker dealing with IT investment
Your statement:"So there really isn't much of a difference between the free and "purchased" distributions, at least not for Red Hat (Ubuntu is free). The main difference is really in the service agreement. That is the case for most instances of Linux." --is in fact totally wrong
You paid XXX amount for upfront purchase of Redhat and for every year , you need to pay the XXX amount again for software maintenance to entitle for patches and version uograde
For Windows SErver , you don't need to pay software maintenance to entitle service pack and patches
For a running six years investment, Redhat will then obviouly be more expensive
Please get your fact right next time and please convey the message to Mr Joe Wilcox
Posted by John | October 23, 2007 10:22 AM
Well well well Maddog you (hopefully) have just learned something new (me too). It shows (thanks to John's knowledge) that Linux is more expensive than Windows.
Posted by Neil | October 23, 2007 7:23 PM
This article doesn't attempt to understand the issues but simply cries foul because the verdict is against Microsoft. That's not balanced journalism but blind fanboy-ism. The problem is that Microsoft has historically maintained a monopoly of the PC marketplace by selling both the server software and the clients and not permitting anyone else to produce interoperable alternatives.
Without trotting out trite car/road or train/track metaphors, I will produce one real-world example of this lock-in. The Macintosh platform (or indeed Linux, although I would contend that other problems also apply) has always been controlled in its access to the corporate environment by not having a true MAPI-based client for Exchange. As a result corporations only use Macintosh in marginal applications. This is how Microsoft want it to be and it has in the past meant that the free market and competition has not been able to work properly with respect to computers in corporate use.
This is not a Good Thing as Joe Wilcox clearly thinks - it is a Bad Thing. Free market competition does not necessarily happen unless attention is paid (by regulators/goverments/legislators) to making sure that the playing field stays level for all participants. This is what the EU judgement has helped to ensure and that's why anyone who believes that competition enhances the breed should thoroughly applaud it.
Posted by Nick Collingridge | October 25, 2007 4:55 AM