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Italian VoIP firm challenges Microsoft/Skype deal

An Italian VoIP service provider is asking European officials to block Microsoft’s US$8.5 billion purchase of Skype, the world’s leading VoIP service, unless it is removed from Microsoft’s Windows Office platform. Messagenet wants to prevent Redmond from bundling Skype with Windows.

Messagenet said the deal will solidify Skype’s dominant position in VoIP calling, excluding other VoIP companies from the market.

Historically, the European Commission has been sympathetic to complaints about Microsoft’s strategy of “bundling” popular applications with Windows, eventually requiring the dominant software maker to make concessions on its media player and Internet browser.

Messagenet’s proposed solution: let Microsoft buy Skype, but disallow Microsoft to bundle Skype software with its Windows operating systems. However legal experts were split over whether the latest complaint, filed September 20 by Messagenet, a company based in Milan that is a rival to Skype Internet’s phone service, would make difficult or prevent European approval of the takeover, which would be the largest in Microsoft’s history and the largest takeover in the technology sector this 2011.

“These types of complaints from rival companies are to be expected,” said Denis Waelbroeck, an antitrust lawyer at Ashurts in Brussels. “I would expect that the commission will look at this thoughtfully, but I think that in the end, the E.U. officials will reach their own independent decision on this matter. This doesn’t mean the complaint will be upheld.”

Joaquín Almunia, the E.U. competition commissioner, plans to make his decision on the acquisition public on October 7. A spokeswoman for Mr. Almunia, Amelia Torres, on Wednesday declined to comment on Messagenet’s complaint. In general, she stated the commission considered all submissions from competitors in antitrust cases.

Microsoft hasn’t responded to the complaint, but a spokesperson noted that Microsoft and Skype are conducting “business as usual” since the proposed acquisition is still under review. Jesse Verstraete, a spokesman for Microsoft in Brussels, said, “Until all regulatory approvals are obtained, it is business as usual at Microsoft and at Skype.”

The European Commission was expected to announce its decision on the acquisition next week.

Aside from asking Microsoft to “unbundle” Skype from Windows, Messagenet is asking European competition authorities to require Microsoft to effectively open Skype’s Internet phone network, which had 124 million regular users in June, to the services of rivals.

Messagenet is urging the commission to do this by requiring Microsoft to reveal the confidential computer coding that would enable rival services to connect calls to Skype users.

Skype’s communication software does not operate with rival services. In May, after Microsoft announced its plans to buy Skype, the managing director of Messagenet, Andrea M. Galli, said he had written to Skype asking for the secret coding that would let the services interconnect, according to the complaint that Messagenet filed with the E.U. commission. Mr. Galli added Skype never responded to the request.

Less than three weeks later, Skype ended its partnership with Digium, a company based in Huntsville, Alabama, USA whose software had allowed users of an open-source Internet phone service, Asterisk, to call and be called by Skype users.

At that time, a Digium product manager, Rod Montgomery, bemoaned in a company blog that Skype for Asterisk, the Digium software, had been a “strong and steady seller.”

After Skype canceled the partnership, Digium stopped selling Skype for Asterisk last July 26. Montgomery stated Skype had guaranteed to support and maintain the software for existing users for only just two years, following a provision in its original contract with Digium.

In his complaint, Mr. Galli said the Digium incident showed Microsoft’s intention to keep Skype as a closed, proprietary software application, unavailable to rivals.

“The first effects of the proposed merger will be an even more rigid approach to interoperability of Skype services so to exclude competitors from the market,” Mr. Galli wrote in the company’s complaint.

The U.S. Federal Trade Commission signed off to Microsoft’s purchase of Skype last June 17, saying that, with rival Internet phone operators Google Talk and Apple FaceTime, there was enough competition to let Microsoft’s purchase proceed.

But that thinking may be less persuasive in Europe, where none of the big global sellers of Internet video communication services are European corporations, and where regulators have a history of challenging Microsoft’s bundling strategy.

According to a report in the New York Times the Messagenet complaint could delay regulatory approval of the Skype acquisition. Skype boasts over 120 million regular users worldwide; Messagenet has about 400,000 registered users of fax, SMS, and VoIP services.