Alan Reynolds

As I feared last August, the European Union just shoved its grasping hand deep into the pockets of a leading American firm -- Microsoft -- while also attempting to dictate the features of Windows and expropriate intellectual property rights of its creators.

Microsoft is to be fined about $600 million, which is essentially a foreign tax on the primarily American owners of Microsoft stock. The EU also ordered Microsoft to share more information about Windows with competitors, which amounts to compulsory licensing at best.

The commission claims the rising popularity of Windows software in small business servers (as opposed to larger servers, dominated by Linux) must be caused by an unfair advantage rather than a better product or price.

PC World reviewed three leading rivals of Windows Small Business Server software on Feb. 3: Novell's small business suite, and two Linux-based suites from SuSE (now owned by Novell) and NITIX. Windows won that contest, largely because it "presents the most intuitive interface by far." Perhaps more surprisingly, Windows also beat the two Linux alternatives on price in many cases and was also cheaper than Novell's until recently. Even Sun Microsystems, which took this gripe to the EU in 1998, sounds far less victimized on its website: "Sun demonstrated significant gains in the sub-$25K server market (all OS), where it grew unit and revenue market share faster than the top 3 vendors in the category quarter-over-quarter."

The EU requirement that Microsoft create a discount-priced Euro-Windows without Media Player has drawn the most ire. If the EU could get away with that, it could also exercise veto power over improvements expected in the next version of Windows, such as built-in virus protection and Internet search capability. This also amounts to European price controls on a U.S. firm, which is appalling.

Reporters were quick to draw false analogies between the Media Player in this case and Netscape's role in the U.S. antitrust case. "In both cases," wrote New York Times reporter Steve Lohr, "Microsoft was accused of being a nasty monopolist that bundled new software into Windows, gave it away and engaged in bullying tactics ..." The key phrase is "gave it away." Netscape and Real Networks initially had such a commanding lead in browser and media player software that they took advantage by charging hefty fees. When free software from Microsoft made gouging impossible, Netscape ran to Washington for help. And Real Networks ran to Brussels.

Alan Reynolds

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