European Commissioner for competition Mario Monti may
demand that Microsoft sell two versions of its Windows operating
system in Europe: one with Media Player inside as it does at
present, and another with the music and video playing software
stripped out and sold separately.
Monti may also demand that Microsoft itself should propose
"within a few months of a ruling" what Windows computer code it
should reveal to make the operating system fully interoperable with
rival software makers' programs for servers, which drive networks
of PCs, a source said.
These likely remedies will come attached to a negative ruling
against Microsoft, unless a settlement is reached during the next
month to six weeks. A negative ruling is expected to carry with it
a fine of at least $100m.
A Microsoft spokesman said the company is still pursuing "an
amicable settlement".
An internal consultation within the commission has finished, and
the proposed negative ruling drafted by the competition department
in January has emerged "almost untouched".
Erkki Liikanen, the commissioner for the information society,
urged Monti to be tougher on Microsoft over the Media Player issue,
while Frits Bolkestein, the commissioner for the internal market,
warned Monti not to infringe Microsoft's intellectual property in
the part of the ruling that concerns interoperability.
Last August the commission told Microsoft that its practice of
bundling Media Player into Windows amounted to an abuse of the
operating system's dominant position because it placed rival music
and video players at a disadvantage.
The commission agreed with Microsoft's rivals, which argue that
firms offering content such as record companies and Hollywood
studios, which can be played on media players will, increasingly,
tailor their products exclusively for Microsoft's Media Player,
because it will be the only player they are sure that people will
have on their PCs.
Microsoft argued that unbundling Media Player from Windows would
prevent the operating system from working properly. It also fears
the precedent that would be set if it did agree to separate Media
Player from Windows.
Future software products, such as an internet search engine
which Microsoft plans to launch to compete with the Google search
engine, count on the bundling business model Microsoft has employed
with all its most successful software products including Internet
Explorer, Word and Outlook Express.
The two operating systems solution would ensure consumer choice,
while allowing Microsoft to preserve its existing business
model.
The separate issue concerning interoperability is seen as the
easier of the two to solve. Last August the commission said that
Windows for PCs runs better with Microsoft's own server software
than it does with competing products from companies including Sun
Microsystems.
This advantage amounts to an abuse of Windows' dominance, and
the commission urged Microsoft to reveal enough of the secret code
that runs Windows to competitors to allow them to make server
software that can run as smoothly with Windows as Microsoft's own
server software.
The draft decision may order Microsoft to decide what must be
revealed about Windows to ensure interoperability.
"If the company fails to comply with the order it would open
itself up to legal action in any national court in the European
Union," one person close to the talks said, adding: "A negative
ruling would set a dangerous legal precedent for Microsoft."
Bolkestein warned that ordering Microsoft to reveal code, which
is protected by copyright, could make the commission vulnerable to
a legal challenge by the company at the European Court of
Justice.
Paul Meller writes for IDG News Service