Troubles for XP

Not surprisingly, Windows XP, the new Microsoft operating system due to arrive in retail outlets later this month, has been heavily criticized by public interest groups. Now, XP's prospects have been hurt by the events of September 11.

Someone is always criticizing Microsoft. In late September, two public interest groups, Consumers Union (CU) and the Consumer Federation of America (CFA), released a joint report claiming that the Microsoft Windows XP operating system, due for official release on October 25, will violate antitrust law just as blatantly—if not more blatantly—than older versions of Windows currently under scrutiny in federal court.

"After an appellate court ruling—seven to zero—that Microsoft has illegally preserved its monopoly in operating systems, were seeing a product come to market that does a lot of the same things that previous iterations of their software did and [that] were found to be unsavory," says Chris Murray, Internet and telecommunications counsel for Consumers Union, the organization that publishes Consumer Reports.

Similar claims have been heard in the past, most notably from the Project to Promote Competition & Innovation in the Digital Age (ProComp), an organization funded by such companies as AOL, Oracle, and Sun Microsystems. But now, on top of all the criticism, Microsoft must deal with the very real possibility that the aftermath from the events of September 11 will severely hamper sales of the new OS.

"Im seeing very little demand for XP," says Rob Enderle, a research fellow with the Giga Information Group. "Considering current events, its increasingly likely that when they actually roll out the advertising program for XP, that program will be eclipsed by whatever happens in response to [the U.S. governments decision to bomb certain targets in Afghanistan]." PC Magazine columnist John Dvorak speculates that Microsoft may end up curtailing its ad campaign ("Will the Terrorist Attacks Affect XP Rollout?").

Of course, most new PCs sold this fall will be preloaded with XP, but the PC market, already 30 to 40 percent below past levels because of the slumping economy, is likely to falter this fall as well. "Im not projecting a recovery until 2003," says Enderle.

The CU and the CFA, like ProComp, claim that Microsoft has illegally bundled XP with Windows Media Player and Windows Messenger, giving these apps an unfair advantage over competing third-party software such as RealPlayer and AOL Instant Messenger. "If I click MyMusic, its going to take me to the Windows Media Player, and thats hardwired in the system," says Murray. "It sets up a lot of low fences that further corral users into Microsoft monopolies."

Such accusations arent likely to bring new antitrust suits against Microsoft. The government has its hands full with the current case, and whether such suits could stand up in court is questionable.

In the current trial, Microsoft faces only one antitrust claim, the so-called monopoly maintenance claim, which accuses Microsoft of violating Section 2 of the Sherman Act by attempting to perpetuate the monopoly it controls in the operating system market. This claim hinges on the belief that a Web browser is actually a development platform, that it exposes APIs, and that it could eventually supplant the operating system as the most important computer interface. By bundling Internet Explorer with Windows, Microsoft was ostensibly preventing browsers like Netscape from eventually competing with Windows.

Robert Levy, an antitrust expert with the Cato Institute, a think tank, does not believe you can apply this claim to Windows XP and apps like Windows Media Player. "Media Player and the Windows Messenger do not expose APIs," he says.

Not even Chris Murray has hopes of another suit, but he would like to see XP addressed when the court decides on a remedy for Microsofts past behavior or when Microsoft and the government discuss a possible settlement. "I would hope that any settlement would have headlights rather than taillights," he says, "that it would look forward to Windows XP."

A revamping of XP could only hurt its sales. With the OSs prospects already low following the September 11 terrorist attacks, Microsoft could face a difficult next few months.