Challenging Vista: Microsoft’s New OS in Europe

Like Microsoft or not, one thing must be admitted about the company: they are big. So big in fact that they are currently seen by some as a threat to the economic plans of the European Union. The perceived threat stems from word that Microsoft, in response to antitrust allegations, may delay the release of its new operating system, Windows Vista, in Europe. The delay depending on whom one listens to, is due to either Microsoft or the EU; in either case the damages could be considerable. Microsoft has already been fined almost a billion dollars, and according to new anti-trust laws in Europe, which allow larger fines to be levied on larger companies, could face even stiffer penalties in the future. As large a fine as that is, the consequences of a delayed European release of Vista for the European economy could be worse. Members of the EU have written to the European Commission warning of the dangers a delayed release could bring; not having the most recent tools, they argue, could hurt the EU’s ability to compete in the world market. This has particular significance now, with the EU in the midst of a ten-year plan designed to develop its knowledge economy and strengthen its global IT standing.

In 2004 Microsoft was fined $640 million for violation of antitrust laws; that ruling is being appealed and the European Court of First Instance is expected to offer a decision next year. In the meantime the EU added an additional $357 million in fines in July for Microsoft’s delayed meeting of obligations to provide technical documentation on several Windows protocols and failure to comply with an order to license information to rivals on how Windows communicates over a network. Currently things are in a stalemate. Microsoft says it will comply with EU regulations if the commission makes them more clear. However, the company also says, according to the UPI that unless things are clarified delivery of Vista may be delayed. From UPI: “Microsoft Corp. is warning Brussels that unless its antitrust policy becomes clearer the company may delay shipping its new operating system to Europe.” The EC has a different view of things, it is their official position that, “It is not up to the Commission to give Microsoft a definitive ‘green light’ before Vista is put on the market. It is up to Microsoft to accept and implement its responsibilities as a near monopolist to ensure full compliance with EU competition rules.”

The crux of the antitrust battle is Microsoft’s bundling of applications into Vista that rival competitor products. This is a concern because Microsoft has the OS running on 95 percent of PCs in Europe, and its ‘near monopolist’ standing, it is posited, could run competitors out of business. Gaining particular attention is Vista’s inclusion of a Windows version of Adobe’s PDF reader. Before talks broke down in June, Microsoft and Adobe had discussed this issue and how to handle it when Vista debuted. Adobe wanted the application to be a paid add-on to Vista, however, under current plans the application, though not bundled, will be offered as a free download for Vista owners. When talks finally ended Microsoft’s chief lawyer, Brad Smith, told the Wall Street Journal, “Adobe has threatened antitrust action unless Microsoft agrees to raise its prices, in particular for the software that would allow Microsoft Office users to save a document in the Adobe PDF format.” Adobe countered in a statement that, “Microsoft has demonstrated a practice of using its monopoly power to undermine cross platform technologies and constrain innovation that threatens its monopolies.” As yet no suit has been filed, but it has been suggested that if Adobe does pursue legal action it is likely to do so in Europe.

While awaiting a possible suit from Adobe, the EU has warned of more fines if Microsoft does not comply; Microsoft’s rebuttal is to delay Vista’s release. The economic impact of Microsoft’s action on the economy of Europe has some quite concerned. Three UK representatives and one from Poland have put their concerns in a letter to the European Commission, claiming that, “This effectively means the EC's actions are endangering the ability of European business to compete globally.” According to Peter Skinner, a UK deputy from the Labour Party, “This would put European companies at a competitive disadvantage with every other company around the world who does have access to these new technologies.” Others outside the European political arena agree with this assessment; managing director of PC World, Keith Jones: “The possibility of a further delay in the introduction of Microsoft’s new operating system Vista in Europe due to regulatory uncertainty would disrupt the computing industry.” Such an occurrence would be particularly unwelcome now as Europe is in the middle of the Lisbon Agenda, a ten year plan meant to create a knowledge-driven economy with a strong global standing in IT. Whatever the results are to the EU, it is suggested that the ‘computing industry’ alluded to might not reside exclusively in Europe, and that Microsoft’s actions could have an impact beyond economics.

Some say that Microsoft, as the dominant player in the PC arena, has an obligation to address problems in that ecosystem. However, instead of working with competitors Microsoft is going solo, an action that could have detrimental effects on the entire industry. Joe Wilcox, an analyst with JupiterResearch: “If there's a problem with bad consumer behavior -- and the major security problem is on consumer PCs -- which affects PCs and causes a threat to the Internet, [Microsoft] should step in and do something. The question is, how that's done. One way is to work with partners, to [develop] the operating system to make sure that their products work better with Windows, and to use [Microsoft's] massive distribution system to get out those products. But instead, it chose to compete with those partners.” Microsoft’s distribution system could ultimately run competitors out of the picture and with them could go innovations and improvements. In this instance Microsoft’s bundling security features into Vista is the major talking point. This bundling, as noted by EU spokesman Jonathan Todd, could be quite harmful. Todd states that the bundling of a security product within, “'its own dominant operating system ... would ultimately harm consumers through reduced choice and higher security risks.”

This current brouhaha may be the biggest that Microsoft has been entangled in since the U.S. antitrust conflagration of the recent past. However, as suggested, the results in the European theater may prove more pivotal to the industry. Microsoft has not been noted for backing down from threats or hailed as a company devoted to the common good of computer users; in fact it is the opposite that they are widely known for. Therefore, complete resolution may be a ways off.