[Ecommerce] Financial Times: Microsoft in EU Windows blow

[Thiru Balasubramaniam]

<SNIP>

The Commission last month accused Microsoft of demanding excessive
royalties from licences.

Microsoft wants up to 5.95 per cent of companies' server revenues as a
licence fee.

But the confidential statement of objections from the Commission in the
long-running dispute makes clear that Microsoft will at best be allowed
to levy a tiny fraction of the royalties it is demanding.

According to calculations by the Commission's technical expert, Prof
Neil Barrett, Microsoft's demands would mean that rivals could recoup
their development costs after seven years.

The Commission's expert, who was suggested for the post by Microsoft,
goes on to calculate that even an average royalty rate of 1 per cent
would be unacceptable for licensees. Prof Barrett states that a 0 per
cent royaltywould be "better" and adds: "We can only conclude on this
basis that the Microsoft-proposed royalties are prohibitively high and
should be reduced in line with this analysis."



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Microsoft in EU Windows blow

By Tobias Buck in Brussels

Published: April 5 2007 03:00 | Last updated: April 5 2007 03:00

Microsoft will be forced to hand over to rivals what the group claims
is sensitive and valuable technical information about its Windows
operating system for next to no compensation, according to a
confidential document seen by the Financial Times.

The group is required to license the technical information to competing
groups under the terms of the European Commission's antitrust ruling
issued three years ago. Brussels hopes the order will allow rivals to
design server software that runs more smoothly with Windows.

The Commission last month accused Microsoft of demanding excessive
royalties from licences.

Microsoft wants up to 5.95 per cent of companies' server revenues as a
licence fee.

But the confidential statement of objections from the Commission in the
long-running dispute makes clear that Microsoft will at best be allowed
to levy a tiny fraction of the royalties it is demanding.

According to calculations by the Commission's technical expert, Prof
Neil Barrett, Microsoft's demands would mean that rivals could recoup
their development costs after seven years.

The Commission's expert, who was suggested for the post by Microsoft,
goes on to calculate that even an average royalty rate of 1 per cent
would be unacceptable for licensees. Prof Barrett states that a 0 per
cent royaltywould be "better" and adds: "We can only conclude on this
basis that the Microsoft-proposed royalties are prohibitively high and
should be reduced in line with this analysis."

Three Microsoft rivals that have reviewed the group's pricing scheme
extensively - understood to be IBM, Sun and Oracle - come to the same
conclusion: "The prices charged by Microsoft are prohibitive and would
not allow them to develop products that would be viable from a business
perspective," the Commission charge sheet says.

A spokesman for the US group said: "Microsoft will respond to the
latest statement of objections in full by April 23. We believe we are
in compliance with the March 2004 decision and that the terms on which
we have made the protocols available are reasonable and
non-discriminatory."

The Commission declined to comment.

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Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)
voice +41.22.791.6727
fax +41.22.723.2988
mobile +41 76 508 0997
thiru@keionline.org