Long ago, it was recognised that the real power in telecom and IT policy within the European Union rested not with bespoke Commissioners – those with responsibilities in fields such as ‘Industry’ (still known as ‘DG-III’) or the Information Society (‘DG-XIII’) – but in the Competition cabinet. Like the others, it is still referred to by insiders and camp followers by its old label, ‘DG-IV’.
Old stagers like this author appreciate the DG-x appellations. Without them, the EU’s myriad bureaucracy balloons out of control. Even with them, it tends towards madness…

Contentious
Now, DG-IV is on the run. On 28 September, it was slapped by the European Court of First Instance (ECFI) with regard to a decision on the putative WorldCom-Sprint merger back in 2000 – a transaction planned at and fuelled by the height of the boom. Today, the ECFI will begin its scrutiny of a separate DG-IV decision relating to software giant Microsoft and the bundling of its MediaPlayer software into the Windows OS. The latter case is expected to run until 2010.

Perhaps the only reason that DG-IV vanquished WorldCom with such finality was that the company was already on the road to implosion when the decision was made. The same cannot be said of Microsoft. The software giant might take some tips from this.

Hindsight – a wonderful thing…
Once the WorldCom-Sprint merger was thwarted (not so much by the EU as by equivalent authorities in the US), the tristeurs went their separate ways.

At the time (July 2000), Sprint said “the companies [Sprint and WorldCom] mutually agreed that the set of conditions ultimately demanded by the US Department of Justice would compromise the customer and financial benefits of the merger. Because the Justice Department asserted it could not be prepared to go to trial on its theories regarding the merger before next year, the companies decided it was not in the best interest of shareholders, customers and employees to pursue protracted litigation. As the companies have mutually agreed to terminate their merger agreement, no break-up fee will be incurred by either company.” No win, no fee.

Whereas Sprint moved on and has belatedly reintegrated its mobile arm into the core company (in May 2004, having spun PCS off as a tracking stock in 1998), WorldCom now exists in the rebranded post-Chapter 11 world as ‘MCI’. The MCI label revives ideas, dating back to the 1980s and its earliest challenges to AT&T, that MCI was no more than “a law firm with an antenna on the roof.” MCI’s reaction to the decision from Brussels confirmed the idea that revenge in cases like this is a dish best served vacuum-packed and deep-frozen.

The ‘rejuvenated’ MCI company said in response to Europe’s verdict on 28 September of this year: "four years ago, we argued that the global Internet environment was rapidly changing and that no competitor could exercise sole market power. Time has proven those arguments to be true. Today's favourable ruling will ensure that future technology services transactions will receive a fair and appropriate review. And while the companies elected to pursue separate strategies after the European Commission's initial reaction in 2000, we believed a decision that so misperceived the highly-competitive nature of the Internet marketplace should not be allowed to stand and affect future transactions in this highly-dynamic industry."

Foresight – be afraid, very afraid…
The Microsoft case which starts today is utterly different. Rightly or wrongly, the EC has been gunning for Microsoft. It’s a big target – but cheap shots won’t harm it and Brussels is struggling to construct a meaningful attack. Earlier this year it ruled that MediaPlayer be segregated from Windows along with broader access to MS Windows source code and a €500mn fine to boot.

Microsoft’s refutation of the allegation that it is wielding near-monopoly powers is of the type that only a near-monopoly could get away with.

Micorsoft said, in June of this year when the case was first formally mooted, that “the Commission’s case seeks to create new law that would chill innovation and economic growth. This new law is untested and it is prudent that the Commission’s remedies be put on hold until the new legal principles have been fully assessed by the Court. The sweeping nature of the proposed sanctions reinforces this point. Once Microsoft releases software code under this decision, those intellectual property rights are lost forever, even if the Court grants our appeal. And once Microsoft releases a degraded product without media functionality into the market, you cannot pull the product back. Once IP is published and once products are released, they cannot be taken back.”