It's the precedents, stupid! Why the real importance of the EU v Microsoft case - Monday is judgment day - has little to do with Microsoft, says Jonathan Zuck.
The European Commission's case against Microsoft is often described as an attempt to protect the Davids of the software world from Goliath Microsoft. The reality, however, is not so clear cut. As the European Court of First Instance (CFI) announces its decision on the case next Monday, tech entrepreneurs across Europe are holding their breath too.
In fact, the implications of the commission's decision and its proposed remedies go far beyond Microsoft and may have drastic effects throughout the IT sector and other industries. In the technology industry where dominant shares in niche markets can be created overnight, even small companies need to worry. Google is a perfect example: it was started just eight years ago, but is now facing its own antitrust scrutiny.
One of the issues to be decided by the CFI is the question of whether Microsoft abused its dominant position in the desktop software market by bundling Windows Media Player with its operating system. The commission is arguing that the mere addition of new features to a dominant product is anticompetitive. While this practice may place additional pressure on companies providing competing products, it is clear that consumers and software developers working on the Windows platform benefit from increased functionality. Consumers are demanding integrated solutions that include media technology and new input methods such as touch interfaces and voice recognition.
Smaller software developers in particular can use these features in their own programmes to develop their products faster and less expensively. In addition, this precedent may also be used against dominant firms in other industries. That is why Airbus began writing a complaint to the commission about the Microsoft case.
But does combining the two components really undermine competition? Ten years after the beginning of the commission's inquiry, much has changed in IT. The significance of desktop software has decreased markedly, with Google offering web-base solutions for data processing and Apple dominating the online music business. RealNetworks, the leading competitor to Media Player, has just announced its strongest quarter results ever. This is yet another example of how competition is thriving in today's technology sector.
Beyond that, the court faces an even more profound question about the direction of EU competition policy: what is the point of maintaining competition? Forcing Microsoft to unbundle its components is good for the competitors, but not necessarily the consumers. Do we need competition for the sake of the competitors? It would seem that, ultimately, the point of competition is consumer benefit. The court should take that into account.
The second question for the CFI is whether Microsoft's alleged refusal to provide interoperability information to competitors in the workgroup server industry harms competition. While there is much debate over whether the interoperability information in question is really necessary for competition, the issue that has the attention of observers worldwide is the terms under which Microsoft has to provide that information.
The commission has said the price Microsoft is intending to charge to give away its IP-protected information is too high. On the other hand, Microsoft claims it has to protect massive investments in research and development.
The court's decision will be a signal to all owners of IP, including small to medium enterprise (SMEs) in the IT sector who will be attentively watching the CFI's judgment. A precedent that gives the commission the ability to seize the intellectual property of any dominant company and give it to competitors would harm the value of intellectual property across the board. Even small startups in niche or new markets must be concerned and IP is even more critical to SMEs.
Many of the software developers based in Europe are SMEs; they are the drivers of economy and yet they are the ones who stand to lose the most with this decision. The business model of a technology entrepreneur - develop software, protect IP, attract venture capital - hinges on the value of its intellectual property. In a climate where the value of IP is in doubt, startups will struggle to raise venture capital. And in the longer term, such conditions harm both innovation performance and competitiveness of an economy.
Jonathan Zuck is president of the association for competitive technology (Act) which represents more than 3,000 SMEs in the IT sector.