Competitors Weigh Value Of European Ruling Against Microsoft

Microsoft's chief rival, RealNetworks, said the court order improves the landscape in Europe for competitive media players like RealPlayer and for Linux desktops that bundle media players. It also benefits manufacturers of PCs and consumer electronics, mobile handsets, PDAs and music players that use alternative digital media formats, RealNetworks claimed.

"The court's decision is a great victory for the [European Commission] and consumers, and will provide PC makers with greater freedom to configure the PC as they see best and allow them to differentiate their products," said Dave Stewart, deputy general counsel for RealNetworks, Seattle. "There's a great implication for the Linux desktop and any competitor in the operating system market. Consumer choices, PC maker choices and system integrator choices will be driven by the merits [of the product] rather than the Microsoft monopoly."

On Wednesday, the court rejected Microsoft's motion to suspend penalties until its appeal of the European Commission's antitrust findings can be heard. After being found guilty of antitrust violations last spring, Microsoft was ordered to pay a $600 million fine and make available to the European market a version of Windows without Media Player. The EC also told Microsoft to offer server communication protocols for licensing by competitors.

While any company can license the protocols, they can be implemented in products developed and distributed only in Europe, Microsoft emphasized. Additionally, Microsoft has no plans to offer a version of Windows without Media Player outside of the European market.

The EC's penalties are designed to level the competitive playing field and -- in theory -- benefit developers of competitive server operating systems such as Linux distributions offered by Novell and Red Hat and open-source projects such as Samba.

But those ISVs said Wednesday they are wary of the value of the order until they see the terms and conditions for licensing the server protocols.

Microsoft said the court did not prohibit it from attaching fees and royalties to its intellectual property. Open source advocates argued before the court in Luxembourg earlier this year that unless Microsoft is required to make available the server protocols and specifications at no cost, it would not be of interest to the Linux community.

Bruce Lowry, a spokesman for Novell, whose Suse Linux development organization remains in Germany, said the company applauded the decision as a victory for competition but noted that the "devil is in the details."

Novell has never licensed the communications protocols made available for the Windows desktop because the terms were too restrictive and expensive, Lowry said. Novell may not bother licensing the new server protocols in Europe if the terms remain cost prohibitive. Still, Novell is not ready to pronounce what steps it will take or whether the order will help Novell's Linux desktop or server compete against Windows server in the European market.

Samba, the open-source project whose file and print server competes with Microsoft's Windows server operating system, said it would be interested in licensing protocols related to Windows replication, searching and remote communication. For the time being, however, Samba remains in a similar position of uncertainty.

Jeremy Allison, a key developer on the Samba project, said the ruling "is meaningless" if royalties must be paid for each copy that uses the protocol because of the terms imposed by the General Public License.

"If Microsoft is allowed to keep charging royalties, then the European Commission has just wasted a big amount of money and everyone's time," Allison told CRN. "Microsoft is using that as their method of preventing [the code] from being exposed to any real competitor."

On the other hand, more favorable terms would allow developers like Samba to improve out-of-the-box interoperability with Windows client and server software. Developers, for instance, could create Active Directory-compatible directory servers, allowing Windows clients to easily talk to any directory server without additional software.

Samba is preparing Samba 4.0, for release next year, to support Microsoft Active Directory. The open-source group would be interested in licensing server protocols that look up user privileges, execute group policies and perform other enterprise file-serving tasks that Windows clients currently use, Allison said.

According to the 90-page decision issued Wednesday, Microsoft has 120 days to release specifications for the protocols used by the Windows server to deliver file and print services and "user administration services," including the Windows Domain Controller services, Active Directory services and Group Policy services to the Windows client. Brad Smith, Microsoft's chief legal counsel, said during a press conference Wednesday that for "common sense" reasons, the European Commission is not forcing Microsoft to divulge its intellectual property to competitors at no cost.

The Redmond, Wash., software giant pointed out that Sun Microsystems, the most significant competitor involved in the European case, has access to its server protocols following a major settlement the pair arrived at last April. Microsoft also claimed that Novell, another major competitor involved in the European case, did not require Microsoft to license server protocols more liberally as part of a settlement those two companies reached last month. Smith acknowledged that Microsoft plans to impose royalties, even though it would impact backers of free software, which adhere to the GPL.

As ISVs and developers wait to view terms and conditions for the server protocols, others in the channel are assessing how to prepare for the new Windows offering through distribution.

Softchoice, a Microsoft large account reseller and partner in Toronto, said the decision will have little impact on PC-Ware, its European partner that serves North American customers across the pond.

"It doesn't mean much," said Nick Foster, vice president of marketing at Softchoice. "It's just another SKU and that might add more complexity into licensing agreements, but how many businesses use [the Windows] Media Player anyway?"

Wall Street firms took the order in stride. Charles Di Bona, a financial analyst for Sanford Bernstein, noted that many of the communications protocols have been released as part of the U.S. antitrust settlement, and that any new protocols would have little impact on competition.

"While the headline value of the court's ruling may have a slight negative effect on Microsoft's stock, we believe that the practical implications of the ruling are minimal," wrote Di Bona in a report issued today. "The two versions [of Windows] will in fact be priced the same, eliminating any top-line impact. Any incremental disclosures [of new server communication protocols] must be assessed on a case-by-case basis, but we suspect the true competitive impacts will be modest."