Microsoft Modifies Icon Concession

Baldwin Louie — Thu, 09 Aug 2001 18:00:00 -0400

In July, Microsoft touted new flexibility for PC-makers to customize the look of the Windows XP desktop. The concession was a direct response to a June 28 federal appeals court ruling that said some of the software giant's licenses were improper.

At that time, Microsoft neglected to publicly announce the limits to that newly granted flexibility. On Thursday, it clarified the fine print: Promote our rivals if you want, but if you think you can close us out, forget it.

The new requirements demand that if PC makers place any icons on the desktop screen, then they must include three Microsoft icons.

Microsoft's original compromise came shortly after the federal appeals court ruled that some provisions in earlier licenses of its Windows operating system with PC-makers – known as OEMs, or original equipment manufacturers – were inappropriately restrictive. The court specifically ruled that OEM contracts restricting PC-makers from removing Windows desktop icons, folders and "Start" menu entries were anticompetitive and "represent uses of Microsoft's market power to protect its monopoly, unredeemed by any legitimate justification."

Redmond, Wash.-based Microsoft quickly decided to address this in the licenses for the upcoming Windows XP, due for release Oct. 25. Previously, it had barred all desktop shortcut icons from the XP screen, promoting a "clean desktop" look, and insisted that users access all programs through a new "Start" menu. On July 11, it announced that it would allow OEMs to place shortcuts to third-party applications and services, such as AOL and RealNetwork's RealPlayer media software, on the screen. It also gave OEMs the freedom to remove shortcuts or icons that give access to the Internet Explorer browser.

The original announcement neglected to state whether OEM exclusion of all Microsoft icons was an option. Thursday's announcement states that it is not.

Microsoft spokesman Jim Cullinan said that of eight slots on the new Start menu that provide shortcuts to applications, three are reserved for Microsoft; the remaining five can be configured by the OEM. If a PC-maker decides to use desktop icons in addition to this Start menu lineup – "the old paradigm," Cullinan calls it – then they must include icons for three Microsoft applications.

If the OEM includes the IE browser shortcut, then the three icons that have to be included are: IE, Windows Media Player and MSN. If the OEM, flexing its new muscle, chooses to exclude access to IE, then the third icon will be Microsoft's Music Maker, an application for creating and editing videos.

"Microsoft is undoing the flexibilities they announced in July," said John Buckley, a corporate VP with AOL Time Warner. "Or the so-called flexibilities are not what Microsoft said they were."

Cullinan counters that even though these details are trickling out only now, OEMs were made aware of this fine print in a letter informing them of the new terms, which he says followed soon after the public announcement. "I don't know if we explained it poorly," he said, "but we were very clear with our OEM partners."

Spokesmen for Compaq and Dell declined to comment.

The head-to-head between AOL Time Warner, which operates the popular AOL Internet service provider, and Microsoft is at the center of the current battle for XP desktop screen real estate. While MSN is promoted within the Start menu and elsewhere within the operating system, AOL Time Warner has signed a deal with Compaq to ensure that its Internet access service is exclusively promoted on Compaq machines. That means users will be offered AOL access, and only AOL access, in the initial startup sequence when they first turn on the computer. Users will still be free to choose another ISP, including MSN, later on.

"We are working with the OEMs to try to promote the AOL service, knowing that Microsoft has built into XP a multiplicity of promotions for MSN," said AOL's Buckley. "They're now demanding three icons should any OEM have the temerity to promote another service.

"Microsoft is saying to consumers, to OEMs and, most importantly, to the Department of Justice, 'We own the desktop, and there's nothing you can do about it,' " he said.

Certainly, Microsoft's July concessions have been considerably hedged. It has a case that the hedging is promoting user choice. After all, why should OEMs be permitted to limit choice by excluding Microsoft?

But unlike Microsoft, the OEMs aren't monopolies. Their power to buy into exclusive deals is not so restrained. This issue will likely be a hot one in remedy and settlement talks that are part of Microsoft's antitrust suit. There, the shackles of the original federal ruling might begin to bite into Redmond's flesh.

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Microsoft Modifies Icon Concession