Why Microsoft's EU problem isn't going away

Jerry Yang may have a dysfunctional relationship with Carl Icahn, but he can take comfort knowing that Europe's top regulator is making Microsoft equally miserable.

The ever-entertaining Neelie Kroes, who is the European Union's competition commissioner, again poked her finger in Steve Ballmer's eye. Earlier this week, she encouraged EU member countries to break their reliance on a single software supplier. (Guess who she had in mind?)

Neelie Kroes: It'll take a lot more than flowers from Steve Ballmer.

(Credit: European Union)

"I know a smart business decision when I see one--choosing open standards is a very smart business decision indeed," Kroes said in a speech. "No citizen or company should be forced or encouraged to choose a closed technology over an open one."

As Loren Feldman's sock puppet sendup of Shel Israel is wont to say, "Fascinating!"

Obviously, the decision to go open source or proprietary comes down to customer preference. But when a powerful European regulator starts picking sides--if not taking on the unofficial role of technology cheerleader--Microsoft must be wondering whether it will ever get a break.

The company has already racked up more fines than any other company in the history of European antitrust enforcement. Earlier this year, the EU hit Microsoft with a $1.3 billion penalty for failing to comply with a 2004 antitrust ruling and for charging "unreasonable" prices to rivals seeking documentation for workgroup servers. In recent months, however, Microsoft has pushed a charm offensive. But whatever thaw it had with Kroes has proved short-lived.

"There were couple times Ballmer came out beaming from meetings (with Kroes) thinking they had ironed out remaining issues. But Europe's a different animal," said Michael Cusumano, a professor at the Massachusetts Institute of Technology's Sloan School of Management. "It's the place where the open-source movement originated and they don't really have any dominant infrastructure players. Their history is that Europe's market has been fractured across different countries with different laws."

(Credit: Dan Farber/CNET News.com)

And no doubt Microsoft is a very different type of company than the sort Europeans have had to deal with. Even though they may have relationships that are cordial on a personal level, Microsoft views its market as global and reserves the right to create linkages among its different products. In the U.S., we understand that a bit more, but rightly or not, Europeans feel they've been victimized.

That's why Microsoft has been saying the right things about open source in public. In March, the company's chief counsel, Brad Smith, told a crowd of open-source developers that Microsoft believes "in a bridge that is scalable, that is workable, that is affordable...that's a hard bridge to build. But I will say this--today more than ever--that is a bridge we very much need to build." A couple of months earlier, Microsoft also pledged not to sue open-source developers for products that connect to Microsoft software and would share communication protocols governing how its software products communicate.

That hasn't made any impression in Brussels. Kroes publicly encouraged both the Dutch Parliament and government to further embrace open standards. Meanwhile, EU regulators are investigating whether Microsoft's guilty of improper competitive practices around Internet Explorer as well as any barriers rivals face making their products interoperate with Office.

Microsoft's Jason Matusow recently had a interesting post explaining why he believed technology mandates didn't make for good public policy.

Technology providers want their current and future technologies considered on the merits of the technology and the value those technologies bring to those who choose to consume it. If a government mandates a specific technology and/or class of technologies, they are unnecessarily restricting their own choices. Inevitably statute moves more slowly than technology, and mandates subsequently lead to sub-optimal choices.

He has a point. Unfortunately for Microsoft, the company's in a permanent bind. It can try to accommodate to open standards but it will not adopt open source as a primary standard. And that means Microsoft is always going to run into an impasse with Kroes or other like-minded overseas regulators.

"I think there is common ground," Cusumano said. "They just haven't found it yet."

[James7777777]

So when are they going to go after apple?

Apple has a clear monopoly (as clear as microsoft's) with the iPod. Then they bundled iTunes, quicktime, and now even safari in order to use the iPod.
They refuse to publish the specs for the drm so itunes purchased music can only be played on an ipod, and ipods can only be synced with itunes. Seems pretty clear they should be the target of some of these suits.

[JasonCe]

Could not agree more.

It seems like people want to go after Microsoft just for the sake of going after Microsoft. Apple and their fully-closed formats have become a monopoly on digital music, yet nobody blames Apple.

[chabig83]

You are misinformed. iTunes music isn't restricted to iPods. It can be played on Mac and Windows PCs, burned to disc and played on CD players, played on iPhones, etc. Then again, Microsoft isn't in trouble for having a monopoly. Having a monopoly is legal. "Abusing" that monopoly is not legal. There is a difference.

[James7777777]

You can't play itunes music on non apple software unless you first burn it to disk (which can hurt quality). There is no way to get your itunes purchased music (drm) onto an alternative mp3 player.

[James7777777]

PS I'm not misinformed, you're just an idiot.

[dcase99]

Simple, tell the EU that they can no longer purchase Microsoft products and change the file types so no open source program can open Microsoft documents.

They want open source, let them have it.

I'll bet there will be a quick "what were we thinking" moment

[valdocs]

A couple of notes about the article. First, "'I know a smart business decision when I see one - choosing open standards is a very smart business decision indeed,' Kroes said in a speech." Open standards and open source: not the same thing. There's a lot of commerical software that supports open standards. Somewhere along the way, many people seem to have confused these two "open" terms.

Second, "Michael Cusumano, a professor at the Massachusetts Institute of Technology's Sloan School of Management [said], '[Europe] is the place where the open source movement originated and they don't really have any dominant infrastructure players." Odd to hear that from an MIT professor; isn't that where Richard Stallman started the GNU project?

[someguy999]

this whole thing is lame. political speakers just like getting there name in the newspaper as the super-hero of the people...

Statements like "I know a smart business decision when I see one - choosing open standards is a very smart business decision indeed" what does that even mean in the work place. what does that mean to you personally, you're numbers are down and you want more voters? oh yeah, you're right... the average secretary needs to be able to open the bits and bytes of a word document so she can tweak it using her local copy of C++... just plain stupid.

at the end of the day as long as my word process can read all my documents, show me th benefits...

[objectiveopinion]

This article has no credibility. The author does not seem to understand the difference between open standards and open source. Example of open standard is Web Services (not necessarily open source) and an example of open source is Linux (not all aspects are open standards). Open standards do help businesses inter-operate and reduce dependency to a single software vendor. Open source is a development paradigm where one can get the software for free but typically have to pay for the support. Open source does not reduce vendor dependency.

In view of the above, this article is a meaningless set of sound bites and buzzwords.

[Moskwice]

Microsoft performs very badly in European public affairs. I was told just this week Microsoft organised this week an SME day in Brussels. UK SME token Peter Jungen insulted the European mainstream as beeing marxist and participants called on the Commissioner to show leadership to go against the European people and make unpopular decision. When you are on foreign soil you need to behave, you just cannot team up with extremists. The way Microsoft refused compliance with moderate antitrust rulings, interfered into European consumer, patent and research funding policy and insulted competition authorities was beyond hearing. In my view the European Union is well advides to switch to open source to break free from an anarchist company that poses a serious issue to a democratic rule because of its autistic and anti-social behaviour in lobbying, esp. as it is not at home here.

The domino effect and their lobbying are a deadly mix. The Commission get converted from its former lazy enforcement policy. The Union needs to be much tougher with Microsoft than it was before unless the company complies with the authorities and embraces competition.

[Seaspray0]

Chabig83, we are not missinformed. There is a monopoly involved with apple. You cannot play "paid" music downloaded from itunes on any mp3 player other than ipod and you can't play it through any other software other than itunes. Since music downloaded from itunes now is a majority distributor of music, this is a monopoly. By refusing to license the drm to other mp3 players, apple guarantees thier monopoly in the mp3 player market as well. Apple is presenting a clear abusive barrier to competition. And now that they are including safari in itunes updates, they are also guilty of distributing malware and are abusing their monopoly position for force their browser onto your desktop. Does all this sound familiar? It should. Microsoft was convicted of monopoly abuse for similar infractions. I'll be laughing at the macboi's when this finally comes to justice.

[MaLvaDo39]

Apple has pushed to strip DRM out of the music on the iTunes store.

You ones attacking Apple need to redirect your aim at the music cartels.

Misinformed kids...do some research first.

[Hank Wells]

My gripe with Microsoft is it aims it monopoly at Europe. We paid twice the price for the same thing. I could also point out while they say well we have to translate it Into another language this is not true in the case of U.K. we get the Americian version. Lets not forget we are unable to buy the cheaper versions of Vista (and XP before that) direct from the USA. If we try they will refuse and tell us to buy it in the U.K. its a nice cash cow for them and is also a monopoly.

From a cheap mail order discount store try this in US dollars; Vista Home Premium $420.66, Microsoft Office 2007 Home and Student retail $161, Vista Ultimate; single user version $702.66. It reeks of "We want your money" all over again.

Apple is no better, but as they are not as popular due to the extreme prices in Europe.

That is why Open Source is popular and why pirate copys are so easy top obtain. Adode Photoshop CS4 very close to $3000. Based on our prices and yours would yopu say we are getting ripped off?