A new feature introduced in the latest test version of Microsoft's Windows XP operating system requires people to establish an account with the software maker's Passport authentication service to use new instant messaging and telephony features.
Critics argue that by using Windows XP to encourage Passport account sign-ups, Microsoft is drawing on its dominance in operating systems to gain a foothold in the nascent market for online services and subscriptions. Passport integration raises the specter of antitrust hanging over the operating system, they contend.
"There are very real consumer issues with Passport, HailStorm and .Net taking away consumer choice," said John Buckley, a corporate vice president for AOL Time Warner. "Trying to dominate in new areas leveraged off the desktop monopoly is a prescription for future trouble for them."
Microsoft has long contended that it has a right to bundle products with the operating system. In the case of Passport specifically, the company says it is meant to be "unobtrusive," and consumers can choose not to use it.
ProComp, a Washington, D.C.-based trade group whose members include Microsoft rivals AOL, Oracle and Sun Microsystems, on Thursday issued a white paper criticizing Microsoft's .Net, HailStorm and Passport integration plans.
The 61-page white paper contends that Microsoft is trying to gain an "identity monopoly" through Passport. The group also attacks Microsoft's broader goals with .Net and HailStorm, arguing, "Windows XP is designed to force adoption of Microsoft's Web services."
ProComp's announcement follows Wednesday's criticism of Microsoft's Web services plans by two of the state attorneys general who spearheaded the antitrust case against Microsoft. Attorneys General Richard Blumenthal of Connecticut and Tom Miller of Iowa said the software giant "may be repeating its efforts to maintain and extend its monopoly" by bundling features into its newest operating system.
But some Windows XP beta testers defend the Redmond, Wash.-based software giant, praising the advantages offered by Passport integration and spurning insinuation that the company is forcing them to sign up for accounts.
"There will always be those people who feel that they are being bullied into signing up for a Passport account," said Pete Kovacevic, a longtime Windows user from Tucson, Ariz. "I think that this is a mind-set because of the name Microsoft. However, the advantages, I believe, outweigh that sort of thinking."
Signing up for Passport--Microsoft's authentication service supporting .Net--is mandatory for use of some new features introduced with XP, including the Windows Messenger communications software. People have the option to log in to their PCs and online Passport accounts simultaneously.
Some analysts and legal experts see nothing as innately anticompetitive about Passport's inclusion in Windows XP.
"It's tough to say there's anything inherently anticompetitive about integrating more into the operating system," said Andy Gavil, an antitrust professor at Howard University School of Law. "Even a monopolist has a right to compete."
Forrester Research analyst Bob Zurek agreed.
"I don't see it as squashing innovation," he said. "I can see it as a positive thing as long as the consumer knows what's going on. You've got to pay the toll to use some features, and Passport is the tollgate."
The dot in .Net
Although Windows and Office command more than 90 percent share in their respective markets, according to Dataquest, Microsoft can no longer rely on PC software to sustain revenue growth, analysts say.
For this reason, Microsoft has been putting into place the pieces for .Net, a strategy for selling software over the Internet as a service or on a subscription basis. Just as AOL Time Warner collects a monthly fee for its online service, Microsoft envisions doing something similar with its software, but delivered to handhelds, cell phones and other devices in addition to PCs.
The first .Net building block, HailStorm, relies heavily on Passport, which Microsoft has used for some time for its MSN Messenger and Hotmail services. Passport is supposed to be a universal gateway to a variety of services--some free, others for a fee--delivered by Microsoft and third-party service providers. People sign in once, with immediate access available to any Passport-authenticated service or Web site.
Microsoft's use of Windows XP as an asset makes sense, said Directions on Microsoft analyst Matt Rosoff.
"Microsoft is basing its entire future business strategy on Web services," he said. "But in order for this strategy to succeed, Microsoft must first demonstrate that its own Web services are successful...By building Passport functionality into Windows XP, Passport instantly reaches millions of users."
But reaching those millions via Windows--a monopoly product according to U.S. District Judge Thomas Penfield Jackson's antitrust ruling--is anticompetitive, some Microsoft rivals say.
"I'm not surprised at all; they're doing it because it's a great way to control their customer base," said Anne Thomas Manes, director of market innovation for Sun. "They own your identity and therefore can control you through that. I'm surprised the DOJ doesn't look into what that's about, what that means in terms of their monopoly."
ProComp, in its white paper, wrote, "Windows XP does not just directly promote Microsoft Passport--it does so exclusively."
Legal sources said that, at least for now, the Passport integration violates no laws.
"If anything, it's pro-competitive, not anticompetitive," Gavil said. "It would only be a problem if they forced you to take their authentication service over others. But Microsoft has left an opening for others to offer alternatives."
Emmett Stanton, an antitrust attorney with Fenwick & West in Palo Alto, Calif., concurred.
"Consumers are already getting the monopoly product," he said. "You're just throwing in some stuff for free you hope they will like in the future. That's more along the lines of the automaker that includes the radio."
That analogy made a lot of sense to Tim Adamczak, a Web developer and Windows user from Albany, N.Y.
"You can always shut off (the feature), so that's no more bother to me than finding the radio on in a rental car," he said.
Paul Dain, director of application development at Emeryville, Calif.-based Wirestone, a technology services company, believes the integration issue is one Microsoft may never shake off.
"It seems that anytime they try to 'integrate' something into the OS, the competitors and critics immediately go on the attack," he said. "Microsoft could integrate a flawless cure for cancer into Windows, and critics would find fault with how closely it's tied to the OS."
Gavil took a similar view, pointing out that competitor complaints may have more to with their authentication position in the marketplace than with Microsoft's.
"If AOL's real problem is they're behind Microsoft a year, they've got a real problem," he emphasized. "But it's not an antitrust problem."
XP is your Passport
Much to the chagrin of some Microsoft competitors, Passport integration with Windows XP could turn out to be a great way to sign up people for the authentication service, helping the software giant to gain a foothold in the delivery of online services.
"The more people that have a Passport, then, when more third parties create services that use Passport authentication, the more people will be inclined to go to these kinds of services," Directions on Microsoft's Rosoff said. "Instead of logging into eBay every time you want to make a purchase, you will have logged in through Windows Messenger or even through the operating system. Your initial log-in might be tied to Passport."
Microsoft doesn't appear to be force-feeding Passport to people, either. While earlier test versions of XP offered Passport account sign-up during the installation process, that will not be the case when the product ships in later October, said Microsoft spokeswoman Erin Cullen.
The second time someone connects to the Internet and as many as four times thereafter, there will be offers to sign up for a Passport account. "But that's all," she said. "We're trying to make this as unobtrusive as possible."
Gartner analyst Michael Silver doesn't see the authentication service sign-up as all that unobtrusive. "Passport is so in your face, it almost guarantees success in terms of people signing up," he said.
Silver's reasoning: Some XP features, Windows Messenger and the Web Publishing and Order Prints services, require Passport authentication. Windows Messenger--a communications console offering instant messaging, videoconferencing, telephony and application sharing, among other features--is the main reason.
In fact, Windows Messenger is so revolutionary, many analysts predict that one feature could drive Windows XP sales.
"Here's a compelling new feature of the operating system they're making it really hard to resist," Forrester's Zurek said. "Oh, and by the way, you need Passport to use it."
Another feature that wooed Windows XP testers: The ability to manage people's system log-in and Passport accounts. Dain explained the advantages.
"With XP, if your system log-in is Passport-enabled, you have transparent access to any Web site or Web service that has implemented Passport as an authentication scheme," he said. "This simply extends AOL's single sign-in model beyond their closed network and, more importantly, bases it on open standards that developers can leverage in their own applications and Web sites."
Microsoft also offers businesses more choices than it does to consumers, who typically would use Microsoft's authentication services, Microsoft Chairman Bill Gates said this week in an interview with CNET News.com.
"HailStorm inside your company, instead of looking at Passport for authentication, will connect to Active Directory. So the only time you need to go out to the Internet within a business is when you want to go between businesses," Gates said. This, he said, would appeal to companies interested in "state management and communications profiles."
Even if Microsoft successfully uses Windows XP to sign up more people for Passport than it might otherwise, this doesn't assure the success of HailStorm and other .Net initiatives, Silver said.
"What Microsoft does after that, how successful they are, depends on getting the right services to go along with it," he explained." A larger number of Passport holders is no guarantee of success."