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Does Microsoft deserve an $800 million fine?

25 March 2004

Microsoft has recently been fined EUR€497,000,000 (about AUD$816,000,000 at today’s rates) and ordered to sell their Microsoft Windows product without the Media Player embedded, and to open up their APIs completely to allow providers of ancilliary products like groupware servers, media players and web browsers to more meaningfully compete in a market which the Court believes Microsoft tied down to and continues to tie down to their operating system products.

Is the fine fair to Microsoft?

This huge fine represents about five days’ sales for Microsoft, or two weeks of their pre-tax profit. Think about being fined two weeks’ wages in exchange for ten years’ bullying of the market; bullying which has allowed you to boost your income at least tenfold.

At first glance, anyone without a scruple would call that a bargain, a slap on the wrist – but the European Union ruling includes monitoring entities to ensure that Microsoft complies, with the implication of further, swift, unarguable penalties should Microsoft fail. CyberKnights believes that as an opening gambit in the political game, and under these circumstances, the fine is reasonable.

Is opening the APIs fair to Microsoft?

How about opening the APIs? If your eyes cross at the sight of too many acronyms, an API is the design of the part(s) of a program which deals with files or other programs, perhaps across a network. If you don’t know exactly how an API works, then designing a different program or producing a different file which can be reliably used with the original program is very difficult.

The last time Microsoft’s APIs were forced open at all, they released old, incomplete and/or buggy API documentation, and padded it out by including much that was already in the public eye. This time, CyberKnights suspects that the enforcing agency will be much less likely to be satisfied with foot-dragging, and so Microsoft might be forced into real compliance.

It seems probable that Microsoft will try their luck anyway, and the enforcement reaction to that is likely to result in even more APIs being forced out than would have been exposed if Microsoft had simply complied in full, perhaps even the forced publication of working source as a working example of the API. Confused as it generally is, the EU has considerably more available willpower to focus on the problem than the USA does.

In the general case of APIs being forced open, CyberKnights would object on the grounds that the APIs are the result of the efforts of the company which designed them. If other people or companies can find out how they work, more power to them, but there is no obligation to disclose them unless they are or purport to be extensions of public or standard protocols or formats – in which case disclosure is a public duty.

Here, the hidden APIs have deliberately been used as a weapon against competitors, and in fact the evidence in the current Minnesota trial shows no less than Bill Gates himself proposing to mutate and control the APIs used even by software which Microsoft don’t own in an attempt to restrain a new form of competitor. Again, the circumstances make the requirement a fair one in CyberKnights’ corporate eyes: since they’ve abused them, they lose them – or at at least stranglehold control over them.

Is this all fair to competitors?

The fine will have no direct impact on competitors. Perhaps if it was spent in part on community infrastructure or “incubators” it might help to make control of IT systems more available to a wider range of people, providing a more truly tech-savvy generation from which both Microsoft and their competitors might eventually draw. If competitors benefit at all from the fine, they will benefit from Microsoft being less adventurous in any future misdeeds due to fear of another fine.

The opening of the APIs will benefit two classes of competitors. Firstly, it will benefit people writing software which works on Microsoft’s systems, and who are in the unenviable (and often short-lived) position of being both dependent on and a direct competitor to Microsoft, such as producers of alternatives to Outlook.

Secondly, it will benefit people writing software to replace Microsoft’s systems. It may (probably indirectly, for safety’s sake) provides some hints and tips to make the Samba team’s work easier. It may provide a shot in the arm for the rising flock of “Exchange killers”. This will also indirectly help the first class in that they can continue to compete with Microsoft but may be able to reduce or eliminate their dependence on the giant firm.

However, the direct benefits will be limited. The remedies won’t undo the damage to their markets which Microsoft has already done, or recompense the competitors for the losses they’ve suffered as a result.

On the gripping hand, these are far fairer terms than the corresponding farce in the USA, and may be only the first stage if Microsoft continues to misbehave.

Is this necessary?

The short answer is “probably no”.

Open Source software is beginning to eat Microsoft’s lunch across the board, and if left to itself would eventually undermine Microsoft’s two cash cows, Microsoft Office and Microsoft Windows, and almost certainly do that before Microsoft manages to force a significant toehold for themselves in adjoining markets such as telephones, multimedia and game consoles.

The longer answer is that it may prove unnecessary, but that if Microsoft isn’t reined in now and it does turn out to be vital, doing so later would almost certainly be much more difficult and expensive.

The political angle is also interesting. The USA is frequently despised for their long-term meddling in other countries’ markets and politics, such as when they recently explained to Argentina, Peru and other South American nations that if they cut back on imports of US software (and piracy!) by encouraging the development of local Open Source based industries, they would face market sanctions.

Having the EU seize this particular economic nettle with a firm hand and carefully uproot it will begin to attract the notice of other nations and alliances, who may then use the EU as an exemplar and possibly even political aide in their own political and economic house-cleaning.

The more alert fringe-dwellers amongst us might be dusting off their books to re-read what much of apocalyptic prophecy has to say about the rise of Europa in the Earth’s last days.

Is this beneficial to the public?


The only real losers here are Microsoft and entities heavily sycophantic to them. Even some of the sycophants will come out ahead, as Microsoft begins to treat them more carefully. This group represents a very small sliver of the public, and the beneficiaries represent practically everyone else.

About CyberKnights Pty Ltd

In the interest of full disclosure, it must be said that CyberKnights will not be represented in that small sliver.

CyberKnights derive a large segment of their business from setting up Open Source programs which replace, protect or interoperate with Microsoft services. The publication of more information can only accelerate the development of these programs, which in turn makes CyberKnights’ tools of choice more powerful, reliable and flexible.

CyberKnights holds membership in the Society of Linux Professionals (WA), the Australian Open Source Industry Association and Linux Australia. We use, distribute and modify Linux, which is free of patents, copyrights or trade secrets owned or controlled by The SCO Group.

CyberKnights operate from sunny Perth, Western Australia, which has a wonderful climate and many world-class facilities. We use and support competent local businesses as much as possible.

“A disgruntled ex-employee who was in charge of making sure we were Microsoft compliant turned us in to the Business Software Alliance,” [Ernie] Ball says. [...] “We were raided by armed Federal Marshals and completely shut down for a day. Then you have to swear you won't touch any data other than what is minimally necessary to run your business,” he says. “I don’t believe you should treat a customer that way.” [...] The company ended up paying a [USD]$90,000 settlement.

Ball [...] decided at that moment his company would become “Microsoft free.” According to Ball, “Everyone said we couldn’t do it. It took us about one year” [to convert to] a Linux-based network and UNIX mainframe.

“I haven’t had to buy XP, and I haven’t had to buy new computers.”

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