Commentary: Windows XP: The Case for Unbundling It Now

A temporary fix would give the competition a fighting chance

By Dan Carney

Ever wonder what the XP in Microsoft Corp.'s (MSFT ) new operating system stands for? It's supposed to be short for the word "experience." But how about "extended proceedings" instead? On Aug. 7, the software giant formally requested that the U.S. Supreme Court review whether the D.C. Circuit Court of Appeals erred by not throwing out a federal judge's ruling that the company had violated antitrust laws. Most legal experts think the likelihood of the high court taking the case is slim. Instead, Microsoft's request appears little more than a delaying tactic.

By stretching out the judicial review, Microsoft seems to be trying to forestall any interim efforts by prosecutors to reengineer XP or halt its Oct. 25 release date outright. Such a strategy would be further advanced if PC makers race to sell XP-loaded products over the Internet before the release date, as many have said they plan to do. But that's not likely to go over well with the Justice Dept. and 18 state attorneys general on the case. And it's all the more reason why they should--and just might--opt for the very interim action Microsoft is trying to preempt. Assuming the Court of Appeals does stay its own unanimous June 28 ruling while the Supremes mull their next move, the light remains green for the government team to press forward.

A FAMILIAR PATTERN. As of yet there's no consensus on how to make XP more antitrust-friendly. But the Feds and the state AGs should definitely try to make it so. The most radical approach would be to enjoin it altogether, a proposition that would inflict considerable collateral damage on the moribund PC industry. The most cautious approach would be to do nothing and hope that any anticompetitive issues created by XP could be fixed through a court-imposed remedy months or even years later. Between these two extremes lies a solution closer to being just right: Prosecutors should seek a judicial order temporarily allowing PC makers to remove the controversial applications, such as Internet Explorer, Media Player, and Windows Messaging that Microsoft has bundled into XP. And it should give manufacturers the ability to add competing programs.

The reason: By tightly bundling a package of programs into XP--similar to the way it bundled its Web browser into Windows 98--critics say the company is repeating the pattern that got it into trouble in the first place. Allowing XP to go forward could severely harm Microsoft competitors--and ultimately, consumer choice.

Of course, PC makers may not do much with such freedom even if they get it. That's one reason why the AGs are debating whether it's worth fighting to win a temporary fix. "There are some who say: `This could divert a lot of time and energy better left for other battles,"' says a lawyer familiar with the internal discussions. But the government team will find that inaction now will only complicate things later on. The goal of a long-term remedy is to restore competition to the desktop software market. Delay may mean there is less competition to restore.

Consider RealNetworks. Its RealMedia program, used to capture music and video off the Web, competes with Windows Media Player, a program that is virtually omnipresent in XP. Boot up your computer, and it will be on the start menu. Go into Internet Explorer or MSN, and there it will be again. Or consider Kodak's photo editing software. It comes with XP, but if you plug a Kodak camera into a PC, Microsoft's competing program will pop up. Left untouched, such tactics will help extend Microsoft's dominance while the courts debate a final remedy.

Forced unbundling, to be sure, has its problems. Prosecutors would have only a few weeks to get a court order if they don't want to disturb the XP launch date. PC makers would need several weeks' lead time to load XP, make any additions and deletions, and ship to stores. And Microsoft, which refuses to comment on unbundling, could protest that it will cause delays. But outside technical experts say Microsoft would be overstating the case.

None of these issues should interfere with the larger goal of preserving competition. The appellate ruling is clear in its goal: Microsoft's grip over PC operating systems has to be fixed, for the present and for the future. That does not argue for a wait-and-see approach. The best course of action: Fix XP now, before it's unleashed--and before it's too late.

Carney covers legal affairs from Washington.

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