MS foes press lawmakers for second antitrust suit

U.S. State lawmakers are being pressed by an industry trade group created by Microsoft Corp.’s biggest foes to file a second antitrust suit against the Redmond, Wash. software maker.

ProComp, a group backed by Microsoft rivals including Oracle Corp. and Sun Microsystems Inc., took a pile of paperwork to Vermont Wednesday to convince U.S. state attorneys general during their annual meeting there that Microsoft’s plans to bundle messaging and media applications with its next operating system is a move to extend its monopoly into other markets.

The group suggested that Microsoft is again using its monopoly power in the PC operating systems market to stifle competition, this time with its forthcoming Windows XP operating system, ProComp President Mike Pettit said in a phone interview from Vermont Wednesday.

He would not comment on whether the state attorneys general were receptive to his presentation but noted he would likely return to their meeting Thursday to answer more questions.

“I’m not in the position to summarize their response,” Pettit said. “Those are judgments they have to make on their own.”

Attorneys general attending the meeting could not be reached for comment, but Iowa Attorney General Tom Miller told the Associated Press that the states are concerned that Microsoft’s strategy with Windows XP may be harmful to competition.

“Microsoft seems to be using much of its power to preclude competition on a new platform,” Miller told the AP. “This is what they did before and this is what they’re doing again to maintain their monopoly.”

Part of Microsoft’s strategy with Windows XP parallels the one used in 1996 when it tightly integrated its Internet Explorer (IE) Web browser with Windows, Pettit said. By giving its browser software away for free with the operating system, which was used on almost 90 percent of all PCs, Microsoft helped crush a competing browser from Netscape Communications Corp. The behavior, described in an antitrust suit filed by the U.S. department of Justice and 19 state attorneys general, contributed to the company being branded a predatory monopolist by a U.S. District Court, a decision the software maker has appealed.

“It’s disappointing, but not surprising, that our competition continues to use time and resources to press lawmakers rather than innovate,” Jim Cullinan, a spokesperson for Microsoft, said of ProComp’s visit to Vermont.

But other critics besides Microsoft’s industry rivals share skepticism over Microsoft’s strategy to bundle new applications with its operating system. Analysts have expressed similar concerns over the software makers use of Windows XP and its emerging .Net initiative to threaten competition in various markets.

“There are shades of IE” in Microsoft’s Windows XP strategy, said Charles King, an analyst with Zona Research Inc. in Redwood City, Calif., in a recent interview. “It does raise the specter again as to what constitutes an operating system.”

The decision to bundle messaging and media applications with Windows might not raise such concern if another operating system developer, such as Apple Computer Inc., made it King noted. But because Microsoft controls such a large chunk of the worldwide market for PC operating systems, giving media and messaging applications away with its OS could deal a stunning blow to competitors such as RealNetworks Inc. and AOL Time Warner Inc.

“I think that Microsoft would probably say that these are simply enhancements to a user’s experience,” he said. “The sensitivity here is (because of) Microsoft’s dominance on the desktop.”

Microsoft’s Cullinan said the additional applications in Windows XP were based on efforts that will benefit consumers. He also noted that they point to the evolution of the operating system, as the Internet becomes more tightly interwoven with the PC and other devices.

“What is considered the plumbing today and what will be considered the plumbing tomorrow is going to evolve,” Cullinan said. “These things that we add are just natural, next steps when looking at the future of the operating system.

“What operating system can be viable without all of those things?” he asked.

Microsoft detailed this month its Windows Messenger product, which will allow users to engage in text and chat messaging as well as video and audio conferencing with other Windows XP users. The technology, which will be bundled with Windows XP when it is released in October, combines MSN Messenger and Microsoft’s NetMeeting collaboration software. It will be a free, standard feature in the new operating system.

As tension mounts over the issue of whether competing instant messaging products will be made compatible, Microsoft’s move to include its own instant messaging service in Windows XP should give the company an advantage over its rivals. MSN Messenger in March remained the most used free instant messaging service in the world, Microsoft said last month, citing figures from Jupiter Media Metrix Inc.

The battle for market share over media players will also intensify with the release of Windows XP. Windows Media 8 has also been embedded in the new operating system, which analysts say gives the company a strong position to evangelize Windows Media Audio, a digital music format that competes with MP3.

Microsoft has also said more in the past two weeks about its Smart Tags, which was first unveiled in the Office XP software suite. Smart Tags will offer direct links to information on the Web such as a stock quote from within Windows XP applications. Critics have said the feature will provide a way for Microsoft to steer users toward Web sites in which it has a vested interest, including its own Internet properties such as MSN MoneyCentral.

“Other people can make smart tags, and we expect them to do so,” Chris Le Tocq, principal analyst with Los Altos, California-based Guernsey Research, said recently. “The question is, does Microsoft have an advantage in the distribution channel getting its smart tags to people, and does it have the advantage of getting consumers to its MSN properties?”

Microsoft’s new hyperlink technology isn’t as anticompetitive as some critics fear, said Jean Orr, an analyst with BlueStone Capital Corp. Microsoft has already said that Internet companies can disable Smart Tags from working with their Web sites. The feature is also disabled in the default setting of Windows XP and must be turned on by a user. Orr also noted that it is in Microsoft’s best interest financially to attract other Web properties to create Smart Tags of their own.

“The potential is there to shut out some competition, but I think that there would be a lot of adverse or negative response to something like that, including government action,” she said. “I do believe that by being more open they maximize their revenue or profit potential as opposed to keeping it closed or semi-closed.”

But Microsoft’s biggest competitors are pressing hard to slow the company down as it enters new markets with its communications and media software, to make sure it doesn’t again use its monopoly power to stifle competition.

“We’ve identified a number of additional violations of the law and we will bring them to the attention of lawmakers,” ProComp’s Pettit said. “If they agree, they have to decide what to do.”

Microsoft Canada, in Mississauga, Ont., can be reached at ProComp, in Washington, D.C., can be reached via the Web at