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Windows XP to reflect antitrust changes

Microsoft will update the OS as part of a proposed settlement agreement meant to benefit consumers and boost competition. But rivals and trustbusters say the changes don't go far enough.

Microsoft this summer will institute some changes to Windows XP as part of a proposed settlement agreement meant to benefit consumers and increase competition. But some state trustbusters and Microsoft's chief rivals aren't convinced that those changes go far enough.

The Gatekeeper: Windows XP The software maker says it plans to start testing Windows XP Service Pack 1 as early as next month, with a final release slated for late summer. The update will introduce support for Mira wireless devices and the Freestyle digital media interface.

More importantly, the update will let consumers and PC makers remove access to about a half-dozen of Microsoft's so-called middleware technologies integrated into Windows XP.

The capability was mandated by Microsoft's settlement with the U.S. Justice Department and nine of 18 states that brought an antitrust suit against the software colossus.

In theory, this change means programs from AOL Time Warner, RealNetworks and other companies could get prominent placement in Windows XP over similar Microsoft technologies, creating more consumer choice and increasing competition.

PC makers, many of which received their first test copies of the service pack about two weeks ago, are still evaluating their options. Several PC makers have already indicated that they would consider swapping out Microsoft middleware, such as Windows Media Player or Windows Messenger, for competing software.

However, nine other states and the District of Columbia, which rejected the settlement, have argued that the change is not up to the task of ensuring competition or consumer choice. They have asked a federal judge to impose a stiffer remedy that would, among other things, force Microsoft to sell a version of Windows with the middleware stripped out. U.S. District Judge Colleen Kollar-Kotelly has not indicated when or if she will rule on that request.

"We're on record saying we think the most effective way to achieve competition is for Microsoft to make available a modular version of their operating system that does not include this range of middleware," said Tam Ormiston, deputy attorney general of Iowa, one of the states seeking the stronger remedies.

Along with the changes in the service pack, Microsoft must also disclose to software developers and PC makers the application programming interfaces (APIs) used by the company's middleware to interoperate with Windows XP.

"The technical disclosure will be of assistance to others in the industry, both companies that are creating so-called middleware features and companies in the server operating systems space," said Microsoft spokesman Vivek Varma.

One of Microsoft's chief competitors said the service pack changes aren't enough.

"The service pack release would appear to be no less than what Microsoft promised the court in November, but certainly no more," said AOL Time Warner spokesman John Buckley. "These are cosmetic changes. Windows XP is as anti-competitive an operating system today as it was on October 25."

Other competitors, such as RealNetworks and Sun Microsystems, also voiced their displeasure with the plan in courtroom testimony over the past few weeks.

The settlement bears fruit
No matter which remedy emerges as the final one, Windows XP Service Pack 1 will give consumers their first taste of the fruits of the antitrust case.

Federal and state trustbusters brought the case in May 1998, in part alleging that Microsoft used its monopoly might to crush rival Netscape Communications, now owned by AOL Time Warner.

The case largely focused on Web browsing technology, which the court defined as middleware, and the potential threat it posed to the Windows monopoly. But the settlement seeks to protect other middleware technologies, while the states' remedy would go much further.

The settlement specifically identifies Internet Explorer, Microsoft's Java Virtual Machine, Outlook Express, Windows Media Player and Windows Messenger as middleware. Until now, neither consumers nor PC makers have had the option to remove or hide most of these programs. Competitors have charged that this has put them at a disadvantage. A PC maker might choose to load the RealOne or MusicMatch players on new computers, but those applications would have to share space with Microsoft's competing Windows Media Player.

In the service pack, Microsoft must at the least allow consumers and PC makers to hide access to those technologies. But the company wouldn't comment on how that process will actually work, citing ongoing development.

"Microsoft is committed to implementing the consent decree as soon as possible, and we are on track to include the changes required by the decree in Windows XP SP1 targeted for release and distribution in the second half of this year," Varma said.

Microsoft's past behavior in responding to court-ordered changes to Windows might offer an indication of what it has in mind. Last July, the software titan responded to a largely unfavorable appeals court ruling by relaxing its Windows licensing policies. The change allowed PC makers and consumers to remove access to Internet Explorer from Windows. But in the end, that turned out to mean nothing more than removing the program's icon from the desktop and Start menu.

"They're hiding access points to the consumer, but the technology is still there," said Rich Gray, a Silicon Valley-based lawyer closely following the Microsoft trial. "There is the potential for conflicts with other third-party middleware, and there is the potential for Microsoft to continue to encourage third-party developers to write their software to make use of this Microsoft middleware. Have we accomplished much? I think arguably the answer is no."

Gartner analyst Michael Silver said that leaving the middleware in the operating system "definitely leaves in powerful hooks to snag developers."

"As long as that stuff is there, Microsoft can work developers to write to their stuff instead of competing middleware," Silver said.

Power to the PC makers?
Ultimately, the middleware changes give PC makers the greatest power. While Windows XP with Service Pack 1 sold in retail boxes will offer the ability to hide access to Microsoft middleware, it is only the versions sold on new PCs that will show any real difference from the old product.

PC makers will have to decide which middleware technologies should get prominent placement on the Windows desktop and Start menu.

Computer manufacturers have been down this road before. Soon after Microsoft relaxed licensing provisions, software developers started offering bounties for prime placement on the Windows desktop and Start menu in place of Internet Explorer 6 and MSN.

"The (PC makers) are the only segment that really benefits from this settlement," said Directions on Microsoft analyst Matt Rosoff. "The benefit for them is greater ability to enter into agreements with third parties--AOL, Real and so forth. If they can charge a bounty, they can benefit."

IDC analyst Roger Kay agreed with that assessment. "I wouldn't at all be surprised to see, say, a Real paying a Dell for prime placement," he said.

Several PC makers said they are exploring options for delivering PCs with more versatile middleware selections. But given that PC makers have just received early copies of the service pack software, which does not include the feature for hiding middleware, no final bundle decisions have been made, they reported.

One major PC manufacturer, which requested anonymity, said both Windows Media Player and Windows Messenger were candidates for the chopping block as the company evaluated potential placement of competing third-party products.

Computer makers, for example, might favor products from AOL Time Warner, such as the America Online Internet service, AOL Instant Messenger (AIM) and Netscape browser, with access to competing Microsoft middleware hidden.

The trouble with multiple versions
Still, analysts said they didn't expect the differences to be all that great among manufacturers, nor do they expect many PC makers to experiment with offering radically different middleware bundles on PCs. The mean reason: the cost of manufacturing and supporting multiple versions of Windows XP.

For that reason, "it's not surprising that you don't hear the OEMs (original equipment manufacturers) asking for a stripped-down version of Windows to which they add middleware," Rosoff said. "From what I understand, it's far too much work for an OEM to do that, that level of customization. It's not something they're particularly pressing for."

Kay predicted that PC makers could run into problems, starting with middleware compatibility, "which is not going to be certain unless or until everyone sees those APIs."

Given Microsoft's past behavior, the API disclosure issue is certainly something to be concerned about, said Andy Gavil, an antitrust professor with Howard University School of Law.

"Just telling OEMs they have the possibility of switching things without making sure the things they might want to switch to are in fact compatible doesn't really smooth the way to more competition," he said.

Since Microsoft doesn't have to disclose the APIs until it ships the service pack, PC makers might not be able to complete all third-party middleware testing for another six weeks or longer, analysts said.

Many analysts predict that, ultimately, PC makers will offer more middleware options, simply because developers will be willing to pay profit-starved PC makers for placement.

"RealNetworks has a version of their product, but they're also trying to sell a subscription-based product or content," Silver said. "The more desktops they get on, the more chance people will use their stuff. That's why companies are willing to pay OEMs to put stuff on the desktop for them. The real estate is valuable."