On Friday, Microsoft, the US Department of Justice (DOJ), and the attorneys general of 17 US states and the District of Columbia filed the second quarterly Joint Status Report detailing Microsoft's compliance with its antitrust settlement. From Microsoft's perspective, the report isn't positive. In the report, the forces that once allied against Microsoft describe their realization that the government's weak settlement with the company is having no effect on competition. And Microsoft's technology licensing program, which the settlement describes, is limited to a "narrow set of products," the report notes. In short, the settlement is a bust, which seemed patently obvious to many outside observers when the US District Court for the District of Columbia first announced it in November 2002.
"\[The US government and settling states\] are concerned that the current \[technology\] licensing program has thus far fallen short of satisfying fully the goals \[of the settlement\]," the report says. "\[We\] have received an additional complaint regarding the sufficiency and completeness of the Technical Documentation that Microsoft provides to ... licensees \[as well\]. \[We\] have received two complaints about aspects of Microsoft's license agreements with OEMs that govern the licensing of Windows Operating System Products. The United States has received \[6 substantive complaints\] ... referring to the Final Judgment ... which will require additional investigation, and that investigation has commenced. Substantive complaints are those that raise issues with Microsoft's compliance with, or the United States' enforcement of, the Final Judgment."
The concerns that the report raises apply to some of the settlement's core tenets. First, Microsoft is required to license Windows fairly to all companies, regardless of their relationship with the software giant; this stipulation prevents Microsoft from punishing companies with which it doesn't have a close relationship. Second, Microsoft is required to license interoperability technologies so that competitors can build products and services that work as well with Windows as Microsoft's own products do. So far, only 11 companies have licensed these technologies, whereas many others have complained that the terms are unfavorable. Third, from a more conceptual standpoint, the settlement was supposed to restore healthy competition to the PC industry. But Microsoft clearly retains a sizable advantage over other companies; Microsoft makes both the dominant OS platform and many of that platform's most popular applications. "\[We\] are concerned that the development efforts of the current licensees are not likely to spur the emergence in the marketplace of broad competitors to the Windows desktop," the report says.
Another tidbit from the report is that Microsoft made its recent decision to change the "Shop For Music Online" link in Windows XP during discussions with the DOJ and states, which cited the feature as an example of the company's noncompliance. After many months of resisting attempts to address this concern, Microsoft agreed to change the link so that it will open any type of Web browser the user selected, rather than Microsoft Internet Explorer (IE), as is the case today. A fix is expected by next month.
Microsoft's section of the report notes that the company has been in "full compliance" with the terms of the settlement and that the company is in the process of making its technology licensing program more fully fulfill the recommendations from the DOJ and settling states. Microsoft also notes that although only 11 companies have signed its technology licensing agreements, the company is in discussions with 20 others. "Today's report confirms that the compliance process is working and that there is thorough oversight," a Microsoft spokesperson said.