Microsoft is fond of saying it actually encourages competition by developing programs that can be customized. Yahoo has stepped up and released a clever bit of software that will put those claims to the test.

Yahoo Essentials customizes Internet Explorer in several ways: it takes over searches in the browser address bar, it switches the default e-mail client to Yahoo Mail, it embeds its instant messenger within the IE window, it adds a Yahoo toolbar below the standard IE menu, it places a shortcut to Yahoo Mail on the PC desktop and it offers to set the home page to

There’s nothing exceptional about any of those changes. But Yahoo is the first company to roll them all up into an integrated package that’s easy to install. I think it’s just great – it’s not something I’ll use, but this is the kind of market competition that makes sense to me. It gives consumers an appealing alternative that moves the focus away from Microsoft in a fair way.

Here’s another example. Bubbles appear onscreen in Windows XP encouraging users to sign up for Microsoft Passport. The Passport infrastructure is meant to be a safe online repository for your personal information that you can draw on for many purposes – you’ll be able to access everything from messaging to credit card information regardless of whether you’re sitting at your desk or an Internet kiosk across the world. There’s widespread agreement that such an infrastructure is an important part of the future development of Internet services, but until recently Microsoft was the only company working on it.

Lots of groups are howling to the Justice Dept. and the newspapers about Passport – bad old Microsoft and its evil tactics and the rest of that stuff. But Sun and AOL have started to develop their own alternative – and I’d like to see them succeed by developing a workable solution that people find attractive, not by stirring up DOJ attorneys.

I would love to see Microsoft hailing Yahoo’s software as fulfillment of exactly its vision of fair competition. They might not do that, but I hope they at least tolerate it. I’ll be disappointed if they change their software to interfere with Yahoo’s efforts in some way. We’ll see if they’ve learned anything from being slapped around during the last few years.

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