10 July 2000

The mighty Microsoft ceded to pressure from the European Commission on Friday and agreed to relinquish its joint control of UK cable operator Telewest.

According to an EC announcement, Microsoft has agreed to limit its investment in Telewest to a minority stake, and will no longer seek to exert joint control alongside US media group Liberty Media. The move ends the four-month competition investigation launched in March, vindicating the tough approach of competition commissioner Mario Monti

The case is seen as another victory for Signor Monti who has taken previous action against other companies to bar them from becoming a "gatekeeper" in a new market, and wielding sufficient dominance to prevent the entry of rivals. Of especial concern was the stranglehold the deal would have given Microsoft's WebTV software – further tightening the grip it already has on digital set-top boxes in the UK via its minority stake in NTL. The latter, with Telewest, effectively controls the UK cable industry.

Senior director law and corporate affairs for Microsoft Europe, John Frank said on Friday that the company had made three key changes: dropping the right to compel Liberty to co-ordinate its votes with Microsoft; to veto a change in chief executive; and to approve independent directors. “By unilaterally waiving these conditions the stake is no longer subject to a filing requirement [under EC law]," said Frank. The decision to give up control rights was the "easiest and quickest way to finish off the regulatory approval process."

The EC’s firm stance is based on its belief that digital TV will become the most widespread means for consumers to access entertainment, education, news and e-commerce.

"Since the final consumer cannot decide on the software and the digital services that are delivered to their homes via the set-top boxes, it is of the utmost importance that cable operators be able to make technology decisions on the basis of fair and equal competition," said a spoke.

News source: Financial Times