Why is Microsoft Poking the EU in the Eye?

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For anyone who doubts the utility of open source, try this:

Microsoft plans to offer PC makers steep discounts on Windows XP Home Edition to encourage them to use that OS instead of Linux on ultra low-cost PCs (ULPCs). To be eligible, however, the PC vendors that make ULPCs must limit screen sizes to 10.2 inches and hard drives to 80G bytes, and they cannot offer touch-screen PCs.

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Microsoft plans to charge PC makers US$26 (£13) for Windows XP Home Edition for ULPCs sold in emerging markets such as China and India, and $32(£16) for those sold in developed markets, the documents show.

PC makers who are eligible for its Market Development Agreement, however, can get a discount of as much as $10 off those prices, the documents say.

Readers of this blog will not need to be told why Microsoft is making this generous offer. The sudden and unexpected rise of GNU/Linux-based ultraportables left the company's soft underbelly exposed, with the threat that an entire new market would slip from its grasp. Its current move is a clear attempt to neutralise that danger.

At one level, it exposes nicely Microsoft's problem here. The limitation it is imposing - screen sizes to 10.2 inches and hard drives to 80G bytes – is because of fears that the new systems will cannibalise more expensive systems, the company's bread and butter. But by imposing that ceiling, this scheme obviously opens up the market for GNU/Linux machines to serve it.

It also shows why open source is good for everyone. At a stroke, Microsoft has reduced the cost of its software for these systems. Not, obviously, out of the goodness of its heart, but because it was forced to by competitive pressures. In other words, the mere existence of free software has demonstrably saved people money in this sector.

There's another issue, though: does this latest move amount to (yet another) abuse of Microsoft's dominant position in the operating systems market? Some would say “no”, pointing out that price reductions of this kind are precisely how capitalism is supposed to work. But others would say “yes”, because it seems to be exactly the same behaviour that got the company into trouble with the antitrust authorities last time.

Now, I'm no expert on the niceties of this or any other kind of law, so I won't try to sort that one out. But one organisation that certainly does have plenty of legal eagles is the European Commission, which is already looking at other aspects of Microsoft's business practice, particularly with regard to open source and open standards. So I'm sure that it is now having a think about this latest move against free software.

That being the case, why on earth is Microsoft doing this:

Microsoft Corp. Friday said it is appealing the EUR899 million fine imposed on the tech giant by the European Commission for failing to comply with an earlier antitrust ruling.

"Microsoft today filed with the Court of First Instance an application to annul the commission decision of February," the company said in a statement.

Microsoft further said it had made the filing in a "constructive effort to seek clarity from the court."

Appealing against a decision that seemed to be done and dusted is one thing; adding the gratuitous comment that it is a “constructive effort to seek clarity from the court” - as clear a poke in the eye as you could wish – seems suicidal. I wouldn't be at all surprised if the European Commission's legal experts started asking Microsoft a few questions about this latest Windows XP deal for ultraportables – purely to “seek clarity”, you understand.