European regulators on the rampage? Maybe not

Microsoft suffered a big setback this week in Europe. Should other large tech companies be worried?

Without a doubt, the reverberations of a European court's decision to uphold stiff remedies for Microsoft's anticompetitive behavior were felt in more than one legal office in Silicon Valley. But which ones?

The top three candidates? Intel, Google and Apple. Intel is facing antitrust scrutiny all over the world, and Google is so ubiquitous that it has become a verb. Apple has raised the ire of European regulators for some time with its iTunes/iPod juggernaut.

The Google era is relatively young, and since I don't cover that area, I'm not going to opine on the effects of the decision to their business. But I have spent a fair amount of time over the last five years writing about Intel and Apple.

Let's take Intel first. European investigators are all over the company right now, having issued a statement of objections to Intel's pricing schemes in Europe, which the European Commission believes excludes AMD from fully participating in the European market and ultimately harms consumers. Intel is preparing its answer to that statement of objections, but the EC's boost of confidence coming off the Microsoft decision could mean that it feels much more confident challenging that answer. The EC can agree with Intel, ask for further explanations, or find its answers unsatisfactory and take action.

As for Apple, the company is currently embroiled in two disputes with European officials. It spent part of its European iPhone tour this week in Brussels meeting with regulators and record labels over the different prices for iTunes songs in different European countries. Regulators in France and Norway have also objected to the fact that songs bought through the iTunes store will only work on iPods.

So, does the Microsoft decision mean the EC feels more emboldened to take on iTunes? I'm not so sure.

Apple does indeed have a dominant share of the market for online digital music, something like 70 percent worldwide. But it doesn't have a dominant share of the music distribution market as a whole.

The EC's decision was centered around how Microsoft made it harder for other applications to work with Windows, in that it was forcing people to use its media player software and limiting the release of information needed by other software to make their products work better with Windows. The corollary here would be that Apple is forcing me to use an iPod if I want to shop for songs on iTunes, and it's forcing me to use iTunes if I want to purchase a song for my iPod.

Is Apple making it harder to use the iPod by making iTunes the only source of downloaded music for the iPod? Perhaps if iTunes was the ONLY source of music for the iPod, then you'd have a beef. But that's not the case.

Whatever your thoughts on Steve Jobs' essay on DRM back in February, few disputed his statement that only around 3 percent of the music on the average iPod was purchased from the iTunes store. If you really want an iPod, but don't like iTunes, you can still acquire music for your iPod from the good old corner record store, or the bad new record warehouse in your local mall. And Rhapsody says you can play individual tracks purchased from its service on the iPod.

So maybe you really like iTunes, but you want to use another music player. It's true that iTunes songs won't work on other MP3 players. But the iTunes Store is not the only game in town: there are plenty of other online music services like Rhapsody that can fill your Sansas or Zens, and they even offer you the subscription option if you want to go that route. And, of course, you can still buy CDs.

The argument against Apple would have to come down to this: iPod customers are being egregiously harmed by their inability to purchase music ONLINE from anyone but Apple and have it instantly delivered to their computer. Or, that iTunes customers can only use iTunes songs on iPods, even though if they don't have an iPod they can acquire the same songs from a variety of different outlets, both brick-and-mortar and online.

Is that really harm? An inconvenience, perhaps, but if the legal standard for harm is having to leave the house to buy something, we're all doomed. If you've got to shop online, there's plenty of stores that will sell you a CD over the Internet.

At least, that's the situation today. If the CD distribution market disappears, and downloading becomes the only way to acquire digital music, then Apple might have to make some changes, such as dropping DRM altogether or opening the iPod up to other copy-protection formats. But that day hasn't come and won't arrive for some time.

Besides, I think Apple's legal department is worried about more near-term concerns these days.

About the author

    Tom Krazit writes about the ever-expanding world of Google, as the most prominent company on the Internet defends its search juggernaut while expanding into nearly anything it thinks possible. He has previously written about Apple, the traditional PC industry, and chip companies. E-mail Tom.

     

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