Microsoft

The chief complainant in the European browser case against Microsoft says that the move to strip Internet Explorer out of Windows 7 in Europe is an insufficient step that won't lead to better competition in the browser market.

In an interview, Opera Chief Technology Officer Hakon Wium Lie said that with regulators threatening action, Microsoft was under pressure to do something, but said that its choice wasn't what Opera was looking for. Lie told CNET that Opera wants people to have access to more browsers, not fewer.

Hakon Wium Lie

(Credit: Opera)

"I don't believe this is going to restore competition in the marketplace," he said.

Instead, Lie favors a proposal that the European regulators have been considering that would require users to be given a choice to download one or more browsers the first time they access the Internet.

"We would like to give users a genuine choice," Lie said. The remedy that the EC has been discussing, a so-called "must-carry" remedy, would be a better solution, he said.

Microsoft acknowledged in a blog posting that regulators could still force that to happen.

"Our decision to only offer IE separately from Windows 7 in Europe cannot, of course, preclude the possibility of alternative approaches emerging through Commission processes," Deputy General Counsel Dave Heiner said in the blog.

But Heinen said that Microsoft believes its move puts it in compliance with European law.

"We believe that this new approach, while not our first choice, is the best path forward given the ongoing legal case in Europe," he wrote. "It will address the 'bundling' claim while providing European consumers with access to the full range of Windows 7 benefits that will be available in the rest of the world."

For his part, Lie said it is a solution that won't fundamentally change anything, as was the case when the company issued a version of Windows in Europe with the Media Player removed.

"They are under pressure to do something and they come up with this thing, which is quite obviously not going to work," he said. "This is very similar to what the remedy was in the Media Player case. It was widely recognized that that was an insufficient remedy. It was too little too late."

By removing the browser, Microsoft won't make life any easier for Opera, which still needs to find a way to get its browser on to computers. It could theoretically now strike a deal with PC makers to get Opera included in place of Internet Explorer, but of Microsoft's rivals, only Google seems likely to have that kind of money. Lie said his company definitely does not.

"Certainly, we are in no financial situation to pay lots of money to have Opera distributed on new PCs," he said.

The situation is even more precarious for those upgrading existing machines to Windows 7. In that case they get a PC with no browser at all. Microsoft will make lots of CDs that will give users IE 8 if they want, but Opera and rivals have no easy way to get on those machines, short of following Microsoft's approach.

Lie also objected to the fact Microsoft is only making the move in Europe.

"It's Europe only," he said. "We're looking for more than that. We want the whole world to have better access to better browsers."

Microsoft met a deadline this week to respond to European Commission charges that its inclusion of a browser in Windows violates antitrust laws there.

In January, the European authorities filed a new complaint with a preliminary finding that Microsoft had broken the law by bundling a browser into Windows.

Microsoft's response was not made public and the company did not offer a comment, but it's fair to say the company disagrees with the finding.

The stakes are high. In addition to potential fines, Microsoft has noted in regulatory filings that European authorities may seek to force Microsoft to include rival browsers with Windows as well as forcing the company to disable parts of Internet Explorer for users who select a different browser.

In other Microsoft news, the company has hired Cyrus Krohn as director of online services programming, a new position reporting to MSN executive producer Scott Moore. He will start on May 4, Microsoft said.

Most recently, Krohn served as director of the eCampaign division for the Republican National Committee and was at Yahoo from 2005 to 2007. Krohn also worked at Microsoft from 1996 to 2005 in various capacities, including as publisher of the online magazine Slate.

Meanwhile, as noted by CNET colleague Jessica Dolcourt, Microsoft has started talking about a new version of its Tellme program for Windows Mobile. Microsoft is counting on Tellme's voice technology to help make its upcoming release of Windows Mobile 6.5 a more compelling experience.

The software is available now for phone makers to start including in their devices and will be available this fall for consumers to download.

European antitrust regulators have granted Microsoft's request to extend the deadline for responding to allegations that the company violated antitrust laws, setting a new deadline of April 21.

The European Commission in mid-January notified the software giant that it objected to Microsoft bundling its Internet Explorer browser in with its operating system.

Microsoft was initially given two months to respond in writing to the allegations, but requested additional time.

A spokesman for the European Commission said it's not usual for companies to request and receive extensions to their response to the Commission's statement of objections.

Since the Commission put Microsoft on notice of its objections, the software giant's arch-rival Google requested to be a "third party" to the proceedings, which will entitle it to review documents Microsoft presents in the case that are not otherwise available to the public. Like Google, Mozilla also requested third-party status in the case. Mozilla is the organization behind the popular Firefox browser.

In addition to a written response to the Commission's statement of objections, the software giant will also be allowed to request an oral hearing on the matter.

Mozilla has been granted a seat at the table in the European Commission's antitrust case against Microsoft, an EC source said Tuesday.

Mozilla requested and was granted "third-party status," which entitles the organization behind the popular Firefox browser to receive access to confidential documents in the case and the ability to voice objections, the source said.

The Commission, which is the European Union's executive arm, in mid-January formally put Microsoft on notice, objecting to the bundling of the Internet Explorer browser with the Windows operating system.

Mozilla Chair Mitchell Baker

(Credit: Seth Rosenblatt/CNET Networks)

The Commission's decision, which initially stemmed from a complaint filed by rival browser maker Opera, gives Microsoft two months to respond to the allegations, as well as opening the case up to third-party involvement.

Mozilla was not immediately available to comment, but its chair commented on the case in her blog on Friday.

Mitchell Baker, Mozilla's chair, wrote that she agrees with the Commission's allegations that tying IE to the Windows OS harms competition for Web browsers and reduces consumer choice. She also noted:

There are separate questions of whether there is a good remedy, and what that remedy might be. But questions regarding an appropriate remedy do not change the essential fact. Microsoft's business practices have fundamentally diminished (in fact, came very close to eliminating) competition, choice and innovation in how people access the Internet.

One potential remedy that the European Commission is considering: a requirement that Microsoft include rival browsers with its operating system.

Baker further notes in her blog:

I'll be paying close attention to the EC's activities, both personally and on behalf of Mozilla. Mozilla has enormous expertise in this area. It's an extremely complex area, involving browsers, user experience, the OEM and other distribution channels, and the foundations for ongoing innovation. An effective remedy would be a watershed event; a poorly constructed remedy could cause unfortunate damage.

I'd like to offer Mozilla's expertise as a resource to the EC as it considers what an effective remedy would entail. I'll be reaching out to people I know with particular history, expertise and ideas regarding these topics. If you've got specific ideas or concerns please feel free to contact me. I'll post more as the discussion develops.

Baker's blog didn't specify her views on bundling Firefox with IE. However, Firefox architect Mike Connor told PCPro that he would consider bundling a mistake. "My personal view is that it's not the right outcome," he told PC Pro. "The choice (when installing Windows) would be weird. There's no good (user interface) for that."

Connor noted that this is his personal opinion and that Mozilla is still determining its position on the issue, according to PCPro.

The European Union is considering forcing Microsoft to distribute rival browsers as part of Windows, the software maker disclosed in a regulatory filing this week.

As part of its quarterly filing with the Securities and Exchange Commission filed on Thursday, the software maker offered more details on the EU's statement last week that it believes Microsoft's inclusion of a browser in Windows violates antitrust law.

Microsoft said that the EU is considering forcing computer makers, known as original equipment manufacturers, or OEMs, to offer multiple browsers with new Windows PCs.

"While computer users and OEMs are already free to run any Web browsing software on Windows, the commission is considering ordering Microsoft and OEMs to obligate users to choose a particular browser when setting up a new PC," Microsoft said in the SEC filing. "Such a remedy might include a requirement that OEMs distribute multiple browsers on new Windows-based PCs. We may also be required to disable certain unspecified Internet Explorer software code if a user chooses a competing browser."

Microsoft also noted that the EU is also seeking to "impose a significant fine based on sales of Windows operating systems in the European Union."

The company reiterated that it will have the opportunity to respond in writing in the next two months and, after that, could also request a hearing.

And that's not the only area where Microsoft faces further EU action. Microsoft confirmed that an investigation into Office may still be ongoing.

"In January 2008, the commission opened an additional competition law investigation that relates primarily to interoperability with respect to our Microsoft Office family of products," Microsoft said. "This investigation resulted from complaints filed with the commission by a trade association of Microsoft's competitors."

In a case of convenient timing, Opera Software's top developer happened to be in CNET's office just after Microsoft disclosed that the European Union has objected to Microsoft's bundling of a Web browser into Windows.

"We think it is right of the EU, for the sake of the consumers, to be concerned about someone potentially misusing their competitive power," Chief Development Officer Christen Krogh told CNET News. The EU action stems from a 2007 complaint by Opera.

Krogh said the Internet is too important for consumer choice to be limited. Developers of software and services, he remarked, shouldn't have to "attach them to something which is proprietary."

The fact that Microsoft's market share has dropped, he said, doesn't ensure that true choice will win out. "There has been more competition before," he said, referring to the Netscape and pre-Netscape days. "Fair competition does not necessarily prevail. We still think whenever a platform has a sufficiently high market share, it should be open and easy for consumers to choose their component to access the Internet."

Even if IE's market share drops to below 60 percent in Europe, Krogh said, "we think that is sufficiently high to be concerned."

Krogh's comments were echoed by other Opera executives in a statement provided by the company.

"On behalf of all Internet users, we commend the Commission for taking the next step towards restoring competition in a market that Microsoft has strangled for more than a decade, wrote Jon von Tetzchner, Opera's CEO. "The Commission's Statement of Objections demonstrates that the Commission is serious about getting Microsoft to start competing on the merits in the browser market and letting consumers have a real choice of Internet browsers."

Opera noted that it follows the same principles applied by the EU in 2004, when it held that Microsoft could not tie its media player to Windows and ordered the software maker to offer a version with the media player stripped out.

"The Court of First Instance's judgment was clear that Microsoft illegally tied Media Player to Windows," said Jason Hoida, deputy general counsel at Opera. "We are not surprised that the Commission has issued a Statement of Objections based on the principles in that judgment. We are confident that the Commission will ultimately conclude that Microsoft has violated European competition law again and that it will take all necessary actions to restore competition and consumer choice in this important market."

The European Union's new complaint against Microsoft really takes one back. Like, a decade or so.

Its objection--that bundling a browser into the operating system violates antitrust law--is the same one that U.S. regulators raised in 1996.

The newest allegations stem from a 2007 complaint by Norway's Opera that Microsoft was hurting competition by including Internet Explorer in Windows and by not better adhering to Web standards.

What is most odd about the EU taking up the issue is its timing. The EU spent years going after Microsoft on antitrust matters related specifically to its bundling of products with Windows and didn't focus on the browser. Plus, the move comes as Microsoft's browser share is at its lowest point since the Netscape days.

Firefox is particularly strong in Europe, the area over which the EU has oversight. According to XitiMonitor, IE had a 59.5 percent share in Europe as of November, compared with 31.1 percent for Firefox. Opera had about 5 percent, and Safari half of that. Microsoft lost a full 5 percentage points of market share since April alone.

That doesn't mean that Microsoft will have an easy time in Brussels. As it has shown in the past, the EU is willing to take a tough line with Microsoft, and it is not averse to fining the company and issuing harsh decrees.

David Anderson, an antitrust attorney and partner with Berwin Leighton Paisner in Brussels, said that Microsoft may well face a challenge ahead in persuading the Commission to set aside its preliminary assessment, saying the commission tends to review matters thoroughly before issuing such "statements of objections."

Further he noted that the commission staff may feel emboldened after having won its previous case against Microsoft. It also has the same set of attorneys that worked on that case pursuing the IE issue, Anderson said.

Microsoft is choosing its words carefully at this point, electing not to go beyond a statement that is more procedural than confrontational. But I can only imagine the words being used behind closed doors in Redmond.

In defending itself, Microsoft will find itself against one particularly familiar foe. Opera's chairman, William Raduchel, is a longtime Microsoft critic, dating back to his time at Sun Microsystems, which brought antitrust actions of its own against Microsoft before eventually settling.

For those who need a refresher course in the browser wars, Netscape had the dominant program in the Web's early days, controlling more than half the market as late as 1997. By 1999, though, Microsoft's IE had more than three-fourths of the market.

It has held the dominant position ever since, accounting for greater than 90 percent of the market through 2004, when Firefox began to make serious inroads. Its share has been on the decline since, according to Net Applications.

Microsoft's browser had an 87 percent share in 2005, but by 2007, its share had dropped to 79 percent. Last year alone, IE's market share dropped from 75 percent in January to 68 percent by December.

CNET News' Dawn Kawamoto contributed to this report.

Updated at 8:33 a.m. PST January 17, with comments from Opera and antitrust attorneys in Brussels.

European regulators notified Microsoft it believes the software giant is in violation of the region's antitrust laws by bundling its Internet Explorer browser in Windows, the company said Friday.

The European Commission, which received that Microsoft was using its market dominance in bundling IE into the Windows operating system, opened its investigation into the tying issue last January.

According to a statement issued by the European Commission:

The evidence gathered during the investigation leads the Commission to believe that the tying of Internet Explorer with Windows, which makes Internet Explorer available on 90 percent of the world's PCs, distorts competition on the merits between competing web browsers insofar as it provides Internet Explorer with an artificial distribution advantage which other web browsers are unable to match.

The Commission is concerned that through the tying, Microsoft shields Internet Explorer from head to head competition with other browsers which is detrimental to the pace of product innovation and to the quality of products which consumers ultimately obtain.

In addition, the Commission is concerned that the ubiquity of Internet Explorer creates artificial incentives for content providers and software developers to design websites or software primarily for Internet Explorer which ultimately risks undermining competition and innovation in the provision of services to consumers.

A spokesman for the commission declined to comment on whether there has been any discussion on whether Microsoft would offer a version of Windows with the browser and one without, much like it did after the Commission ordered it to separate its Windows Media Player from its operating system and offer a version with and without the operating system.

A spokesman for Microsoft declined to comment, noting it would not make statements beyond its press release.

Microsoft, in response to the Commission's statement of objections, said:

We are committed to conducting our business in full compliance with European law. We are studying the Statement of Objections now.

Microsoft will have two months to respond in writing to the European Commission's objections and also will be given an opportunity to request an oral hearing. After assessing Microsoft's written and/or oral response, the commission will issue a final decision on the matter, which could include a fine, an enforcement order, or a remedy.

Microsoft, meanwhile, further noted in its statement that the commission indicated in its "statement of objections" that the remedies put in place by the U.S. courts in 2002, following antitrust proceedings in Washington, D.C., do not make the inclusion of Internet Explorer in Windows lawful under European Union law.

In reacting to the commission's objections, rival browser maker Opera applauded the move.

"We think it is right of the EU for the sake of the consumers to be concerned about someone potentially misusing their competitive power," Chief Development Officer Christen Krogh told CNET News.

Antitrust attorneys in private practice in Brussels said the commission's "statement of objections," is not a light matter and is likely to pose challenges for the software giant.

David Anderson, an antitrust attorney and partner with Berwin Leighton Paisner in Brussels, said, "The commission's continued pursuit of Microsoft's tying of its operating system to Media Player and now Internet Explorer sends a clear signal to dominant companies in Europe: the commission is serious about exclusionary tying and bundling."

Anderson added, however, that if the commission ultimately requires Microsoft to offer a version of Windows with and without IE bundled in, pricing will play a key role.

The commission won the battle but lost the war on its Media Player order, said some antitrust experts. Microsoft was able to offer versions of Windows with and without the Media Player for the same price and, as a result, computer makers and users loaded the Windows version with the Media Player.

But while pricing may be a key issue if the commission opts to require Microsoft to unbundle IE, European antitrust regulators may be reluctant to demand such an order because it would require them to set pricing, and enforce and monitor adherence to the order, Anderson said.

One well-informed antitrust lawyer in private practice in Brussels said the commission would not likely require Microsoft to unbundle IE from the operating system, since that remedy did not work well with the Media Player.

Instead, the commission may consider proposing that Microsoft offer more than one browser with its operating system, noted the antitrust attorney.

And although some antitrust attorneys say they expect similar tying cases to arise with the commission and Microsoft, this antitrust attorney disagrees.

"The commission will only go after the really important applications that result in platform monopoly maintenance, in the long term," said the antitrust attorney.

The attorney cited Microsoft's Windows, IE, and Office, as well as its server operating software, as examples of a platform monopoly. And, more recently, the attorney said Microsoft is looking to the Internet as its next platform for Web applications that will be made dependent upon Windows to run and look their best.

The European Committee for Interoperable Systems raised the same issue, noting in a statement:

By tying Internet Explorer to Windows and using proprietary IE standards, and making Web applications and Web content dependent on Silverlight and .Net, Microsoft seeks to establish itself as the Web's gatekeeper.

Meanwhile, Anderson noted that Microsoft may also face an emboldened commission staff, given the same set of attorneys who won the Media Player case before the European Court of First Instance are the same ones overseeing the IE issue.