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Not everyone is happy about Windows XP's digital imaging tools.

Although the upcoming operating system's built-in imaging software offers convenience, some think its inclusion limits users' choices in photo applications and Web photo-finishing services.

The foremost critic, Kodak, is one of Microsoft's major online digital photo processing partners. But as Microsoft posed with its photo partners at a Microsoft-sponsored digital photography event Tuesday, Eastman Kodak wasn't smiling. Instead, the company issued a statement condemning the software maker's tactics for creating an operating system that Kodak argues limits consumer choice and competition.

Easy Access or Unfair Bundle?

When the new operating system is released on October 25, it will include a bundled digital photo application that guides consumers conveniently through the steps for capturing a digital picture file from a camera, modifying it with software, and printing it through an online photo finishing service.

Pulling itself from the pack of more than 20 partner hardware and software companies supporting digital photography on Windows XP--from Compaq to Sony--Kodak contends that Microsoft's operating system unfairly promotes its own digital photo software and photo finishing Web site over competing applications and services from Kodak.

Tools built into Windows XP allow users to download pictures from digital cameras or scan images into their computers, view and organize their pictures, and share those files via e-mail or the Web. But in the process Microsoft has said it plans to charge an up-front fee and a transaction fee to third-party companies that are given preferential treatment as application and service providers.

From Windows to the Web

What Kodak calls "taxing the Internet," Microsoft says serves in the best interest of consumers. "When you get a new PC you'll be able to have a great end-to-end digital photo experience," says Greg Sullivan, lead product manager for Windows XP. "There will be offers from some service providers. We're working with a set of partners to make sure that right out of the box there is a service offering."

Kodak says that Microsoft is "positing itself as the gatekeeper" of the online photo industry. Microsoft sets its digital photo software as the default application on Windows XP, according to Kodak's statement. Kodak also argues that XP steers consumers to Web sites that print digital photos, such as the MSN Photos Web site or Web sites from vendors that agree to pay Microsoft a fee for every picture printed by way of the Windows XP operating system, Kodak wrote in its statement.

"The Microsoft choice is visible, Kodak's is hidden," says Anthony Sanzio, a Kodak spokesperson. "They're doing this in an attempt to take customers away from Kodak and other software vendors."

Pulling from its arsenal of defense remarks, Microsoft's Sullivan says the company has made the necessary concessions to give competitors equal footing with software and services on Windows XP, and is still debating the technology that will be included in the commercial release of the operating system.

"Windows makes it really easy to pick whatever software you want to use and whatever service you want to use," Sullivan says. "We're really focused on addressing the needs of our customers and developing a platform that all of our partners can build on, and add value to, to provide the greatest customer choice."

XP Critics Abound

The latest industry criticism over the applications and services bundled with Windows XP adds to a laundry list of other complaints. AOL Time Warner continues to battle Microsoft over the placement of icons that lead to Internet services on the startup screen users first see when they turn on a Windows PC. A digital rights management technology firm, called InterTrust Technologies, filed a patent infringement lawsuit against Microsoft alleging that the company is illegally using its technology for products and services included in Windows XP.

Privacy groups also filed a complaint with the U.S. Federal Trade Commission against Microsoft's Passport authentication service loaded into Windows XP, and Congress is investigating Microsoft's plans to bundle its media player and instant messaging applications into the operating system.

Meanwhile, Kodak--a strong partner in AOL's online photo finishing services--has been embroiled in ongoing discussions with Microsoft over its treatment of digital photo applications and services on the new operating system for more than a year, Sanzio said. Originally, Windows XP forced consumers to go through what he called "the gauntlet of nine mouse clicks" to be able to use Kodak digital camera software over Microsoft's. With some negotiating, Microsoft has reduced the number of mouse clicks to reach Kodak's software to two.

"We're happy that Microsoft has made some changes to Windows XP, but we still believe Microsoft is giving its own applications preferential treatment," Sanzio says.

XP Adopts Open Standard

Kodak also argues that Microsoft has "co-opted" an open standard called PTP (Picture Transfer Protocol) in Windows XP and is using it in a way contrary to its original design. PTP is an industry standard jointly developed by Kodak, Microsoft, Intel and other technology companies that enables digital cameras to talk to computers, printers, and other devices using a common language.

After taking the lead on developing PTP, Kodak now says the technology that was intended to allow companies to build compatible digital cameras and services based on the open standard is now being used to hinder competition in Windows XP.

"One of the things that Microsoft plays on is that consumers will benefit from this," said Dana Gardner, an analyst with Aberdeen Group. He says that in Microsoft's case, it goes contrary to promoting competition because Microsoft's monopoly in the operating system market enables it to make its own software and services most beneficial to consumers. "If you're the only player in town then how good is that for the consumers?"

Most of Microsoft's hardware and software partners are standing behind the technology bundled with Windows XP. Representatives from Fuji and Epson, for instance, praised the new operating system in a statement Tuesday for simplifying the process for consumer digital photo services. However, while these companies have built their software and services around Windows XP, they will still be forced to compete for users; and Kodak argues they don't stand a chance.

"Consumers should be able to freely choose the digital photo application of their choice," Kodak wrote in a statement Tuesday. "Microsoft should not steer consumers to 'approved vendors' where Microsoft will tax the transaction."

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