The European Commission will announce its final ruling against the software giant next Wednesday (March 24).

Beyond a proposed fine against Microsoft — believed to be anywhere from 100 million euros to 1 billion euros — the EC is expected to impose a remedy that goes at the heart of Microsoft's Windows Media Player strategy, thus inhibiting a central element in the company's broader goal of becoming a key player in the digital media software market here.

Reportedly, the commission will demand that Microsoft sell two versions of Windows to PC manufacturers in Europe: one with Microsoft Windows Media Player bundled as it is now, and the other one with Media Player unbundled.

It remains unclear, however, how successful this remedy will be in reality since many in the industry believe that Microsoft has already "completely won the digital media software battle."

Indeed, by bundling Windows Media Player into a proprietary operating system that dominates the PC market, Microsoft has made its Windows Media Player a dominant audio/video codec, too popular for content owners and service providers to ignore.

This oft-claimed "unfair advantage" created by Microsoft is not just about which proprietary media codec wins on a desktop or whether it is Windows, RealNetworks' Real Player or Apple Computer's QuickTime. More importantly, the codec affects the design of consumer electronics products such as mobile handsets, gateways, set tops and the next-generation high-definition DVD systems.

Microsoft is becoming increasingly successful in coercing content owners to encode digital media content in Windows Media Player, while pitching its Media Player to industry groups and consumer electronics manufacturers as a "must-have" next generation audio/video codec for emerging digital consumer standards such as HD DVD and DVB-Handheld.

To reach the broadest audience, content owners and service providers are said to be inclined to encode their content in the Media Player format rather than MPEG-4 or even in emerging H.264.

But many here are hopeful that a stiff European antitrust decision against Microsoft could hinder a Windows Media Player regime that threatens to dictate key specifications for every home gadget ranging from PCs, TVs and set tops to DVDs and mobile phones.

Earlier this week,, market researchers In-Stat/MDR released a report concluding that in broadcast, Internet, DVDs or video on demand, Microsoft's push into digital media has gained it leverage in the market for determining the direction of these various content channels.

According to Mike Wolf, principal analyst with In-Stat/MDR's Consumer Media and Content Group, "From its investment in Movielink, plans for online music, Xbox, the Windows Media Series 9 platform for delivering content over any network, its Digital Rights Management offerings and its Media Center PC initiatives, Microsoft is increasingly doing business with those who control the creation and delivery of content." Wolf said that contrary to recent speculation Microsoft's goal is not to own a huge media company, "but instead to have its hand in as many pies as possible through its end-to-end tools. The company will continue to make itself relevant, and hence its core products, such as the Windows operating system, by adding value."

The EU advisory committee is scheduled to meet again next Monday ((March 22) to decide whether to endorse the proposed fine. The Commission's final ruling is expected to come two days later.

Unlike the U.S. antitrust system, where a judge makes the initial decision, the European Commission hands down a ruling and courts provide an avenue for appeal. Microsoft said this week that it would challenge next week's ruling in the European Court of First Instance in Luxembourg. Microsoft would not say if it would seek to postpone the remedies until after its appeal. Some observers speculated that it could take three to four years for the case to be completed at the European Court.

Meanwhile, the Commission is expected to ask the court not to suspend the remedies during Microsoft's appeal. If successful, the Commission's ruling will become effective in the European Union within months of its announcement.

By: DocMemory
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