Europe Reaction to Remedy Plan Guarded

BRUSSELS (06/08/2000) - European reaction to the breakup order issued yesterday in the U.S. government's antitrust case against Microsoft Corp. is generally positive, albeit fairly subdued, as European Union officials pursue their own inquiries into the company's business, and industry insiders scramble to absorb the details of the ruling.

The European Commission's competition commissioner, Mario Monti, while refusing to comment on the substance of the case, "congratulated" the U.S. Department of Justice on the work it has done, his spokesman said.

However, the European Commission said it was premature to comment on the details of the breakup, ordered yesterday by a U.S. federal court judge, Amelia Torres, Commission spokeswoman for competition, said today.

"It is not the end of the story, so we will have to see what happens; the ruling will have no immediate impact because there will be an appeal," she said in response to questions.

When pressed, however, she acknowledged that the ruling could have an impact on ongoing Commission investigations of Microsoft.

"If there is a mandatory disclosure of the source code for Windows, this could have implications for our own investigations," she said, declining to provide further details.

She pointed out, however, that "our own investigations are not exactly the same as those in the U.S. case" meaning that while the breakup may resolve the U.S. antitrust concerns, it may not necessarily resolve all the European Union's problems with the company's alleged antitrust activities in the EU.

The Commission is currently processing a handful of Microsoft-related cases involving its alleged abuse of a dominant market position. One inquiry involves Micro Leader Business, a French software wholesaler that alleges that Microsoft violated antitrust rules when it banned Micro Leader from reselling in France copyrighted Microsoft software imported from Canada.

The Commission is also involved in an in-depth investigation of Microsoft's planned acquisition of Telewest PLC, the U.K. cable company. The EU is concerned that Microsoft will leverage its dominant position in operating systems into the new field of standards for set-top boxes for digital television.

The Commission's comments follow the ruling yesterday by U.S. District Court Judge Thomas Penfield Jackson that Microsoft should be broken into two separate companies as a remedy to what he ruled was the company's illegal attempts to use a monopoly position over operating software to quash competition.

The judge ordered that Microsoft be split into two separate companies -- one for its operating systems and the other for its applications and Internet Explorer Web browser businesses. Microsoft has already announced its plans to appeal the ruling and has filed a stay of the judge's order to impose behavioral restrictions even before the appeal is heard.

Microsoft competitors have expressed cautious optimism about the breakup plan.

For example, Colin Tenwick, vice president for Europe, Middle East and Africa for Red Hat Inc., the Linux operating system vendor, commented that "if they split it into two, it's just going to create two monopolies." He expressed hope, however, that if the split does materialize, it will benefit Linux.

"We will start to see a major slowing down of Microsoft, just as Linux use picks up," he said.

Jon Hall, the executive director of Linux International, a nonprofit group that distributes information about Linux, believes that the use of Linux will rise, whatever happens to Microsoft.

"The Linux market has already been growing, and I anticipate it will keep on growing, regardless of what happens to Microsoft," he said.

He acknowledged, however, that the breakup and the additional restrictions that the U.S. government will place on the split entities could accelerate Linux take-up.

"If Microsoft is broken up (into separate companies), that would be the ideal time for people to say 'Hey, it's time to port Office to Linux.' That might help it (Linux) out considerably to get into the marketplace," he explained.

For Hall, however, "more important than if Microsoft is broken up, is ... additional restrictions the government puts on them, like having them make their interfaces be open (source)."

Part of the judge's order is that Microsoft should publish APIs (application programming interfaces), which allow software developers to build applications on top of the Windows operating system. [See UPDATE2: Judge Orders Microsoft Breakup," June 7.]Applause for the ruling, however, is not universal.

In anticipation of the ruling, earlier this month Julie Meyer, chief marketing officer of First Tuesday -- a company that matches up investors and entrepreneurs and startups -- expressed doubts on the potential benefits.

"It comes down to the fact that Microsoft offers a real standard. If you break up Microsoft it could cause a lot of market confusion from a user point of view," she said. "I can see arguments that a lot of European users in startup companies could end up paying more, though in the long run it could promote better competition, it's hard to say."

The problem with a breakup is that companies that have already standardized on Microsoft technology may have to alter their plans, and that doubts about exactly how -- or if -- the breakup will occur, may sow confusion among users, she said.

"When you are setting up a company, you need to understand what the platform is if you're going to bet your start up on it. You don't want your platform pulled out from under you. And there are costs for porting to other platforms. It could also be costly from a software development point of view," she told IDG in a telephone interview.

(Laura Rohde and Douglas F. Gray contributed to this article.)

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