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Federal antitrust regulators and Microsoft issued a joint status report Tuesday on the software giant's compliance with the 2003 final judgment on interoperability with third parties.

In the interim report, the parties focus on efforts by the U.S. Department of Justice to enforce the final judgments of the 2003 order and Microsoft's work on complying with those judgments.

The final settlement stems from a 2002 consent decree, which the court, in a ruling earlier this year, extended by two years. Under the settlement, Microsoft agreed to be subject to antitrust review for compliance of the consent decree, which calls for Microsoft to share its interoperability information with rivals and other third parties.

Microsoft and the Justice Department give their respective assessments in the status report, and the parties currently have a status conference scheduled for next Tuesday. (Here is a PDF of the report).

In the interim report, the Justice Department claims three issues have arisen that affect Microsoft's progress in improving the documentation it supplies to third parties. The documents relate to its Milestone schedule, including the last group of documents designed to cover an update to Windows Server 2008, or Longhorn, product.

Here are excerpts of those three issues raised by the Justice Department:

First, the TC (Technical Committee) determined that in the process of revising the technical documentation, Microsoft removed a number of protocol elements that were included in previous versions of the documentation. When this same issue arose last year, Microsoft and the TC discussed that Microsoft would not remove protocol elements from the documentation without first discussing it with the TC in order to ensure that there was no substantive disagreement. Plaintiffs are concerned that the same problem has occurred again. In some cases there may be perfectly valid and sufficient reasons for removing certain protocol elements (2), but it is important for the stability of the documentation that the TC review the proposed deletions before they occur, as Microsoft and the TC previously agreed.

Second, and on a related note, the TC has suggested to Microsoft that it would be extremely beneficial to the TC and licensees to create a mechanism for detailing changes between versions of the documentation. Currently, it is difficult to tell exactly what has changed when Microsoft releases a new version of the documentation. This slows down the TC in its work by making it difficult to evaluate revisions to the documentation and causes issues such as the one discussed in the previous paragraph, where it is difficult for the TC (and Microsoft itself) to determine whether protocol elements have been removed from the documentation. Licensees have also informed the TC that the absence of version-to-version change information complicates product development. Microsoft was receptive to the TC's suggestion and will work with the TC to develop an effective mechanism to track changes to the documentation.

Finally, at the beginning of the year Microsoft changed the schedule for publishing updated technical documentation from monthly to quarterly. The TC's experience with this change has not been positive, as it creates a longer lag time between the identification of issues in the documentation and the publication of fixes to those issues. Licensees have expressed similar concerns to the TC. The TC therefore raised this issue with Microsoft in a recent meeting, and Microsoft agreed to increase the frequency of publishing updates to the documentation.

And here is footnote (2) for the first issue of concern raised by the technical committee, which deals with the "valid and sufficient reasons for removing certain protocol elements":

2 For example, Microsoft or the TC might have discovered that a particular protocol element does not actually pass over the wire between a Windows server and a Windows client, but rather is merely internal within the Windows server and therefore does not need to be documented as part of the MCPP (Microsoft Communications Protocol Program).

The Justice Department further notes that as part of the original documentation plan Microsoft said it would produce to give an overview to third parties on how the MCPP protocols work together, the software giant developed a template for the system documents and will discuss potential modifications to the template with the technical committee.

To date, Microsoft has developed a list of 19 system documents it plans to create and an approximate schedule for producing the paperwork. Microsoft expects to publish drafts of the 19 documents by the end of March and a final version by late June 2009.

Microsoft's licensing policy for the interoperability information will be further tweaked, after the Justice Department raised several issues over the software giant's new patent license. The Justice Department wanted to ensure that future licensees had the "same legal rights under the license that existing licensees possess."

And in the issue of Vista's successor, Microsoft recently authorized the technical committee to review another early build of the Windows 7 operating system. And as the Windows 7 builds progress, the technical committee will conduct middleware-related tests to ensure Vista bugs don't reappear in Windows 7.

Microsoft, meanwhile, notes it's made progress in complying with the final judgment order of 2003. The software giant stated that although it has received seven complaints or inquiries since the last joint status report in late February, none of these issues is related to Microsoft's compliance obligations under the 2003 final judgment.

Since making its communications protocols available for free on its Web site, users pulled 146,000 downloads of the documents since the first of this month, Microsoft noted.

Also, 49 companies have licensed patents for the communications protocols since the final judgment, with 36 of the companies signing aboard for a royalty bearing license.

The software giant also noted it is working toward providing additional information on its protocol documentation.

Microsoft stated in the report on its progress in communications protocol licensing:

While Microsoft firmly believes that the current protocol documentation available to implementers enables interoperability with Windows and fully complies with the Final Judgments, in response to the Technical Committee's ("TC") request, Microsoft is undertaking a new effort to supplement the existing protocol documentation with additional "System" documents.

And on its progress in modifying the technical documentation, Microsoft notes it is currently examining ways to present changes to its various document versions in an efficient fashion, as well as working on ramping up the frequency of publishing protocol documentation from a quarterly cycle. Microsoft anticipates presenting its revised schedule in the coming weeks.

The software giant also addressed its progress in resolving technical documentation issues via protocol test suites, which tests newly rewritten protocol documentation; as well as its interoperability labs, which offers direct access to the software giant's product development teams and engineering staffs for technical support to test licensees' implementations of MCPP protocols.

To date the interoperability labs, which are offered free to MCPP licensees at its Microsoft Engineering Center, Microsoft completed an interoperability lab with one licensee in March and another in May.

"Microsoft received very positive feedback from licensees on both events," Microsoft stated in its status report.

The U.S. Department of Justice has closed the books on one of its cases targeting allegations that high-powered companies swapped unlawful kickbacks in government agency technology contracts.

Nearly four years after whistleblowers filed a lawsuit that named, among other companies, Computer Sciences Corp., CSC has agreed to a $1.37 million settlement with the Justice Department to resolve the allegations.

CSC--a major government contractor that specializes in consulting, systems design, and outsourcing--had been accused in September 2004 of "knowingly solicit(ing) and/or receiv(ing) payments of money and other things of value, known as alliance benefits, from a number of companies with whom it had global alliance relationships," according to the Justice Department, which announced the settlement Tuesday.

The Justice Department conducted an investigation after the suit was filed and ultimately intervened in the case. The agency said it had determined that those business relationships amounted to kickbacks and undisclosed conflicts of interest, violating federal rules governing contracts in the process.

The settlement is part of a broader investigation into the relationships between government technology vendors. Last April, the Justice Department said it had joined a case against Hewlett-Packard, Sun Microsystems, and Accenture alleging that they paid unlawful kickbacks in federal contracts. Those companies have denied the charges. Much of the case remains under seal, so details are scant, but a Justice Department spokesman confirmed Tuesday that litigation involving those companies is still happening.

The original court complaint claims that alliance of kickback swappers consisted of "virtually all of the major sellers of hardware and software in the United States," but the government has not agreed to intervene with regard to all of the companies named, including Microsoft and Dell.

IBM and PriceWaterhouseCoopers agreed to pay the United States more than $5.2 million to settle similar allegations last summer.

CSC did not immediately respond to requests for comment on Tuesday. The Falls Church, Va.-headquartered company has been awarded, among other things, a major contract for shepherding a much-criticized overhaul of the Internal Revenue Service's aging computer systems.

U.S. law often comes down hard on price fixing. That's why a magazine story in October about efforts to create a music subscription site potentially backed by the top four music labels may have sounded alarms in Washington.

Universal Music Group and Sony BMG Music Entertainment have received requests for information from the U.S. Department of Justice about a proposed music site called Total Music. The DOJ interest comes after an October BusinessWeek story that said Doug Morris, Universal's CEO, pitched an idea for a subscription site to at least two of his three main competitors, Sony BMG and Warner Music Group. A source with knowledge of the discussions told CNET News.com that Universal Music also went to The EMI Group with the plan. This, say antitrust attorneys, was sure to raise eyebrows at the DOJ.

"Let's say Ford and GM decide to get together to sell cars," said Bob Lande, a professor at the University of Baltimore Law School. "We would blink a couple of times and then we'd say, 'Hey, that's a cartel. You can go to jail for that.'"

So why would Universal Music risk backing an idea that might have the appearance of a price-fixing scheme, right in the middle of a feud with Apple? That feud with Apple could well be the answer.

In July, Universal Music considered not renewing a long-term contract that enabled it to sell digital music through Apple's iTunes, according to a story in the The Wall Street Journal. The record companies have long asked Apple CEO Steve Jobs for the ability to set their own song prices on iTunes. Jobs has refused, and the price for most songs remains 99 cents.

The music industry has been forced to wait for an attractive iTunes alternative to show up. Morris may have grown tired of waiting.

Besides talking to his competitors, Morris also approached Google, Microsoft, Facebook, and MySpace to gauge their interest in the subscription site, according to a source with knowledge of the discussions.

There isn't enough information available to determine whether any laws were broken in Universal's meetings with its competitors, said Lande, but he also added that his "gut instinct says that it sounds fishy."

Perhaps the biggest problem for Universal and Sony BMG is that BusinessWeek reported Total Music would offer an all-you-can-eat music service for $5. The mention of a price, if accurate, indicates that the music labels may have discussed price. And that sounds like a potential violation of the Sherman Antitrust Act, Lande said.

The Sherman Antitrust Act makes it illegal for anyone to make deals to limit competition. Violations of the Act are felonies that can land someone in jail for up to 10 years, Lande said.

Lande said that in some cases even attempting to fix prices violates the law.

One source close to Total Music, who asked to remain anonymous because of the pending DOJ investigation, disputed BusinessWeek's assertion that prices have ever been mentioned.

What hasn't been answered yet is why Morris would attempt something that would definitely run into a legal roadblock. Is there any scenario whereby the record labels could partner to sell music together?

Lande said he could think of only one scenario: The music industry was allowed to form a body called the Broadcast Music Inc. BMI is a performing-rights organization that collects license fees on behalf of musicians, composers and other music artists from radio stations across the nation.

The group was allowed to form because it's impossible for a single music artist to police hundreds of broadcasters that might be playing his or her music. It also isn't an anti-competitive practice, Lande said. "I don't think the same application would apply (in the Total Music scenario)."

Dominick Armentano is a research fellow and free-market advocate at the Independent Institute, a think tank in Oakland, Calif. He believes companies should be allowed to do what they want in a truly free market--that includes price fixing. But even Armentano said that under current U.S. law, there's no way competitors can gather to discuss price. He could think of only one way that the music labels could legally go into business together.

"They could try to merge," Armentano said. "Mergers have been allowed to go through in the past and the companies have then been allowed to fix prices. But I doubt that the DOJ would allow them to do that either. That would violate Section 7 of the Clayton Act." That part of the Clayton Act, passed in 1914, is designed to regulate mergers and acquisitions whenever they might diminish competition.

Armentano, who has written books backing the idea that price-fixing companies would still compete with each other in other areas of their business, said charging higher rates also typically invites other competitors into the market.

What if competitors fix prices that are lower than anywhere else? Would the government smile on that?

Not a chance.

"The offense is fixing the price," Lande said. "You never get into high price or low price. If you fix the price you're violating the law. Judges don't want to get into what the price is now. The price might be $5 today but next month it might be $8 and the next month $10. All they want to know is whether this is price fixing."

UPDATE: 5:02 P.M. Federal regulators have begun asking questions about a plan supported by at least two major record companies to launch a jointly operated music-subscription site.

The U.S. Department of Justice has requested information from Sony BMG Music Entertainment and Universal Music Group about Total Music, an iTunes competitor that plans to offer music from all the majors for a $5-per-month subscription fee, according to a report in the newsletter Music Alley.

Two sources close to both record companies confirmed that that the labels had received letters from the DOJ in an interview with CNET News.com. A spokeswoman for the Justice Department declined to comment. Representatives from Sony BMG, and Warner Music Group did not return calls. Universal Music declined to comment.

A spokeswoman from The EMI Group said that executives there have not been asked for information from the DOJ.

The Justice Department's investigation is unprecedented for something that has yet to get out of the concept stage, according to one of the sources who spoke on condition of anonymity.

Universal Music CEO Doug Morris, who according to an October story in BusinessWeek came up with the idea for Total Music, has only floated the plan past the other three record labels, the source said, adding that no contracts have been signed, no money has changed hands, and no final decisions about whether the site will ever be launched have been made.

Two sources said that the DOJ has asked Universal Music and Sony BMG for any documents or information that would help them learn about Total Music.

The source said that Universal Music has also spoken with Microsoft, Google, MySpace and Facebook about their interest in a subscription site.

Businesweek reported that Morris was interested in launching an iTunes competitor. Morris had already enlisted the support of Sony BMG and was in talks with Warner Music Group, the magazine reported. If the start-up was successful at securing deals from all the top three labels, then it would offer about 75 percent of the music sold in the U.S.

Morris' plan, according to the magazine, is to convince hardware makers and cell carriers to help carry the costs of the $5-per-month subscription fee, so Total Music can offer consumers a device that comes with "all-you-can-eat" music that's available for a very low fee.

WASHINGTON--The Bush administration's antitrust head on Thursday painted a rosy picture of competition in the voice, video,and broadband markets, although he warned the Justice Department is looking out for potential roadblocks.

Assistant Attorney General Thomas Barnett

(Credit: U.S. Department of Justice)

"This is a very dynamic industry," Thomas Barnett, assistant attorney general for the Justice Department's antitrust division, said during a daylong symposium here hosted by his department. "It's doing wonderful things, and people are investing and taking risks with many billions of dollars."

Barnett is the same official who recently argued against the need for a lengthier period of government oversight on Microsoft's antitrust agreement with the government. Also under his tenure, the megamerger of AT&T and BellSouth received unconditional approval from his agency, although it did propose conditions on AT&T's recent purchase of the rural wireless carrier Dobson Communications

The rise of "cross-platform competition"--for instance, the fact that consumers can get video services from a traditional cable operator, a telephone company, or a satellite provider, to name a few--is good for consumers, the antitrust chief said. He touted the number of digital channels to which many cable and satellite subscribers now have access (compared, of course, with the four analog channels when he was a boy), the plunging cost of long-distance calls, and exploding wireless and broadband subscription rates over the past few years.

Still, his office does hear periodically about "factors that may be slowing the expansion of this competition," Barnett conceded.

Some challenges are technological--for example, in deploying high-speed mobile broadband networks and broadband over power lines. Others are economic--that is, the hefty price tag for building out new infrastructure. Others still are regulatory, Barnett said, such as when providers of video service are obligated to seek approval from multiple local authorities before they enter the market. (The department has already cautioned this year against burdensome restrictions at the local level and advocated for greater "efficiency" through state-level rules, causing some local officials to bristle.)

For now, though, Barnett didn't offer any hints as to what actions, if any, the department might have in mind, aside from producing a report on competition issues in the telecommunications space sometime next year.

It's official: a key U.S. Senate Democrat leader has escalated his committee's ongoing quest for more answers about a once-secret warrantless wiretapping program, issuing subpoenas on Wednesday to Attorney General Alberto Gonzales and three other Bush administration officials.

Sen. Patrick Leahy (D-Vt.) formally requested an avalanche of documents describing the legal basis for the so-called Terrorist Surveillance Program and any other ongoing classified surveillance programs. Besides Gonzales, the senator targeted high-level attorneys at the White House, Vice President Dick Cheney's office and the National Security Council. The Senate Judiciary Committee, which Leahy heads, authorized the court orders by a bipartisan 13-3 vote last Thursday.

Among the desired documents are any certifications provided by the Justice Department or other executive branch officials that request assistance from telephone companies, Internet service providers, equipment manufacturers, or data processor. (Recall that a lawsuit filed by civil liberties groups is pending against AT&T concerning allegations that it cooperated illegally with the NSA and has spied on millions of innocent Americans. Meanwhile, the Bush administration has been pushing for legislation to immunize such companies from liability.)

In his letters to the officials, Leahy said the committee had made at least nine formal requests for information over the past 18 months but had been rebuffed on each attempt.

"The Administration cannot thwart the Congress's conduct of its constitutional duties with sweeping assertions of secrecy and privilege," he wrote. "The Committee seeks no intimate operational facts and we are willing to accommodate legitimate redactions of the documents we seek to eliminate reference to these details."

Justice Department spokesman Dean Boyd said in an e-mail interview Wednesday that the agency, for its part, "will continue to work closely with the Congress as they exercise their oversight functions, and we will review this matter in the spirit of that longstanding relationship."

But he indicated that the politicians may not be able to get all the documents they're after. "It is vital to protect sensitive intelligence sources and methods associated with this kind of national security information, particularly when it relates to intelligence programs that are the subject of oversight by the Intelligence Committees," Boyd said. "We must also give appropriate weight to the confidentiality of internal Executive Branch deliberations."

Besides, any electronic surveillance that may have been done in connection with the "terrorist surveillance program" as of January 2007 is now being approved by the secret Foreign Intelligence Surveillance Court, and information about those court orders have been shared with "appropriate" members of Congress, Boyd added.

The National Security Agency program first came to light in a December 2005 New York Times report, and since then, Bush administration officials have mostly defended their admitted failure to secure court approval for the eavesdropping. But in an appearance last month before the Judiciary Committee, former Deputy Assistant Attorney General James Comey told politicians that there was actually disagreement within the department about the regime's legality, arousing new suspicion among critics.

The documents are due in the committee's hands by July 18. The panel also requested in-person testimony by each of the subpoena recipients on that date but said they would waive that requirement if all of the requested documents are delivered on time.

Copies of the letters are available at Leahy's Web site.

WASHINGTON--For more than a year, senators on a panel that oversees the U.S. Department of Justice have been trying to get their hands on Bush administration documents illuminating a once-secret National Security Agency surveillance program that operated without prior court approval. Now they may get their chance.

At around midday on Thursday--after a few hours of stalling, a floor vote and one meeting venue change--the Senate Judiciary Committee finally rounded up enough votes to authorize subpoenas compelling Attorney General Alberto Gonzales and President Bush's recordskeeper to turn over all documents related to its operation and legal analysis of the warrantless regime. The vote here was 13-3, with three Republicans rejecting the measure and three Republicans joining 10 Democrats to approve it.

The action was necessary because of repeated "stonewalling" by the Bush administration, which has failed to surrender the necessary documents voluntarily, a number of committee Democrats and Republican co-chairman Arlen Specter (R-Penn.) said.

"I've been here with six administrations and have never known an administration on substantive issues like this to be so secretive and so unwilling to cooperate," Committee Chairman Patrick Leahy (D-Vt.) said before the vote.

Of particular concern to some members are conflicting reports that have recently surfaced about the department's own views on the legality of the so-called "terrorist surveillance program." During a Senate appearance last year, Attorney General Attorney Gonzales indicated there was no dispute within the department that the wiretapping regime was within the law, but former Deputy Assistant Attorney General James Comey told politicians at a hearing last month that there was actually "substantial disagreement" on that front, Specter said.

Some committee members who voted for the subpoenas said the Bush administration shouldn't expect to get the electronic surveillance law changes it wants unless it provides more information about its eavesdropping activities. The administration has been lobbying Congress for a proposal that would, among other things, immunize from lawsuits all telecommunications companies that assist the U.S. government in its surveillance--seemingly a direct shot at scores of pending suits, including one targeting AT&T.

It's unclear when the subpoenas will be issued or what exactly they will request, although groups like the American Civil Liberties Union and the Center for Democracy and Technology have each composed wishlists.

It also remains to be seen how the Bush administration will respond. Presidents in the past have attempted to use their executive privilege powers to decline all or part of such requests, although courts have curbed their power to do so. Specter, for his part, said, "if president is going to impose objections of executive privilege or attorney-client privilege, we will deal with that when that arises."

Meanwhile, there also been no further talk of subpoenaing executives at telecommunications companies about their alleged cooperation--an idea that arose last summer but was ultimately dropped.