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Microsoft Judge Skeptical

E.U. Order on Media Player Questioned

By Jonathan Krim
Washington Post Staff Writer
Saturday, October 2, 2004; Page E01

LUXEMBOURG, Oct. 1 -- A European judge today cast a skeptical eye on whether Microsoft Corp. should be forced to create two versions of its Windows operating system, one with its program for playing digital music and videos and one without.

On the last of two days of hearings here, Bo Vesterdorf, president of the European Union's Court of First Instance, questioned whether an order by antitrust regulators would work to restore competition or confuse consumers and possibly hurt other firms.


Bo Vesterdorf, president of the Court of First Instance, asked whether the Microsoft order would restore competition or confuse consumers. (Francois Lenoir -- Reuters)

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Vesterdorf is to rule within 60 days on whether the mandate will take effect immediately or be put on hold while Microsoft appeals a European Commission judgment that it broke antitrust laws. That appeal could take several years.

If Vesterdorf allows the order to take effect, regulators for the first time would have prevented the software giant from pursuing one of its primary growth strategies: bundling more and more functions into an operating system that runs on more than 90 percent of the world's personal computers.

Vesterdorf also will rule on whether the company should be forced to immediately disclose more software code to rival makers of server systems, which run networks of computers, so they will work better with Windows systems.

Microsoft has been battling antitrust charges in Europe since the commission opened its investigation five years ago. Similar antitrust charges in the United States resulted in a settlement with the Justice Department in late 2001, but negotiations in Europe broke down early this year.

In March, the European Commission ruled that Microsoft began bundling its Windows Media Player into Windows in 1999.

By including the media player in Windows, the commission found, Microsoft put rival makers of media players, such as RealNetworks, at a severe disadvantage. They must either pay computer makers to include their software on new machines or rely on users to download it from the Internet. Microsoft's share of the media-player market jumped after it started bundling, the commission said, in much the same way that the company swamped Netscape's Internet browser in the mid-1990s using the same strategy. The Windows player accounts for about 60 percent of the media-player market.

"The remedy has to come before it is too late," Per Hellstrom, an attorney for the commission, told the judge. He said that the media-player market has not yet "tipped" overwhelmingly in Microsoft's direction but that will happen if the order is put on hold while appeals run their course.

The commission hopes that by creating a version of Windows without Microsoft's media player, rivals could strike exclusivity deals with computer makers for their products. Producers of music and videos would have greater incentive to code their entertainment for rival players. Having two versions from which consumers could choose, Hellstrom said, would "break the ubiquity of the Windows Media Player."

Erik Simon, chief executive of VideoBanner.com, said his Los Angeles firm had high hopes for its technology to deliver voice-mail messages over the Internet. But once Microsoft began using its media player for the same function, "customers said they were opting for Microsoft because it was universally pre-installed."

Microsoft and groups of corporate allies responded that the two versions would sow confusion and damage many small Web vendors whose products rely on the Windows media player to work.

Microsoft displayed a video showing how removing the media player would damage Windows' ability to even support rival players. RealNetworks showed a video of its own showing that everything would work fine.

Jean-Francois Bellis, an attorney representing Microsoft, said asking the company to produce a version of Windows without media-playing capability is akin to telling an ice-cream maker to churn out "a repulsive flavor."

Although he did not comment on that issue, Vesterdorf pressed commission officials on how they could be sure the two-version plan would work and wondered aloud if anyone would be interested in buying the one without the Windows player included.

"Isn't it drastic to propose a remedy that you don't know whether it will work?" he asked Hellstrom.

Hellstrom responded that while the commission could not predict what consumers would do, it was simply trying to create a level playing field.


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