Software by the Pound

How will the EU antitrust people value Windows Media Player when they order Microsoft to offer a discounted version of Windows without it? Look for a bad idea that's been tried before.

News reports indicate that European Union antitrust regulators are likely to order Microsoft to offer a version of Windows without Windows Media Player. Because nobody would want that version at the same price as the full version, the EU will order that version to be sold at a discount to the full version. But at what discount?

This issue was dealt with by the U.S. Justice Department, its clients (Sun, Netscape, IBM, et. al.) and Judge Thomas Penfield Jackson in the U.S. antitrust trial. In the final judgment, using language essentially identical to that proposed by the DOJ, Microsoft was ordered to allow OEMs to remove any piece of "middleware" from Windows, substitute a competitor and receive a discount for the code not used. (Dont get me started on what "middleware" is supposed to be; the term used to have a real meaning before the government got hold of it.)

Calculating the value of one feature of a large work of software relative to another is not an easy thing to do. Windows was always meant to be sold as one product, so theres no pricing history on which to rely (except that many of the so-called "middleware" features are or were available for free download). Without any rational basis on which to set the prices, this is what the government ordered:

The discount for any feature withheld from an OEM installation was to be proportional to the percentage of bits occupied by that feature in Windows. For example, if Windows Media Player were 1 percent of the bits in Windows, an OEM would receive a 1 percent discount off Windows for leaving it out. This notion of pricing software by the pound was invented by the DOJ (or perhaps by Netscape—who knows for sure?), and if the order hadnt been vacated, who knows what nutty consequences might have resulted.

Heres the actual quote from the actual final order of the court (section 3.g.ii):

... when an OEM removes End-User Access to a Middleware Product from any Personal Computer on which Windows is preinstalled, the royalty paid by that OEM for that copy of Windows is reduced in an amount not less than the product of the otherwise applicable royalty and the ratio of the number of amount in bytes of binary code of (a) the Middleware Product as distributed separately from a Windows Operating System Product to (b) the applicable version of Windows.

Next page: Why the EU will take this approach.