Microsoft: Customers stay because switching's too expensive

The European Competition's decision on the Microsoft ruling was released on Thursday by the Wall Street Journal, which obtained a leaked copy of the report that was prepared for Microsoft.

The 300-page document, now available on the European Commission web site, contains some fascinating insights into Microsoft's culture and business practices in the form of direct quotes from internal emails sent by the company's senior executives.

On page 126, in a section describing the way that Microsoft's Windows operating system has become a 'must-carry' product for client PC vendors, the Commission quotes from an internal memo drafted for Bill Gates by C++ general manager Aaron Contorer in 1997.

In the email, Contorer outlines the reason why he thinks that customers have stuck with Windows despite Microsoft's shortcomings. He attributes their loyalty to the high costs of switching away from their existing heavy investment in the Windows Application Programming Interfaces (APIs).

"The Windows API is so broad, so deep, and so functional that most ISVs would be crazy not to use it. And it is so deeply embedded in the source code of many Windows apps that there is a huge switching cost to using a different operating system instead..." the email reads.

Issues such as this led the European Commission, the executive arm of the 15-nation European Union, to hit Microsoft with a record $613m fine in its long-running antitrust case. Regulators ruled in March that the company had failed to give rivals information that they needed to compete fairly in the market for server software and that it has been offering Windows on the condition that it come bundled with Windows Media Player, stifling competition.

Late on Wednesday, in anticipation of the report's publication, Microsoft posted a seven-page paper to its website that aimed to portray the company as the victim of overreaching regulators. The paper called the March ruling a "new law" and cited both the ruling's potential to cause damage and its alleged legal shortcomings.

The commission's response to the Microsoft paper was terse.

"This is a decision the commission has taken. We will be explaining our decision in court and not in the press," Amelia Torres, a spokeswoman for the agency, said on Thursday.

Microsoft is expected to seek a stay on the remedies outlined by the regulators, taking the legal battle to Europe's Court of First Instance.

In the commission's report, Contorer's email was also blunt about Microsoft's shortcomings.

"It is this switching cost that has given the customers the patience to stick with Windows through all our mistakes, our buggy drivers, our high TCO [total cost of ownership], our lack of a sexy vision at times, and many other difficulties […] Customers constantly evaluate other desktop platforms, [but] it would be so much work to move over that they hope we just improve Windows rather than force them to move. In short, without this exclusive franchise called the Windows API, we would have been dead a long time ago."

Michael Parsons writes for ZDNet UK. CNET News.com's Dawn Kawamoto contributed to this report.