Microsoft will license the source code for its Windows server software to avoid being fined €2 million a day by the EC.

The decision will fully address "any doubts" the Commission has that the software giant had not yet fully complied with its anti-trust ruling, Microsoft said.

But while some have called the decision as an unprecedented victory and evidence of the EC's effective approach, rival companies have claimed the announcement is nothing but a ploy that will see the argument stretch on still further, with Microsoft retaining an unhealthy level of control in the market.

Last year, the Commission threatened to hit Microsoft with the hefty fine unless it complies with its March 2004 anti-trust decision.

As part of that decision, Microsoft was ordered to licence the communications protocols for its workgroup server software so other vendors can develop products that inter-operate smoothly with Windows.

On Wednesday, the Commission said in a statement that it would carefully study the Microsoft announcement, once it had received the full details.

Microsoft general counsel Brad Smith said that he believed the company was already in compliance by offering around 12,000 pages of documentation and 500 free hours of technical support. But the company is prepared to go a "substantial step" further and offer access to the source code so that developers could answer any questions they had by looking at the code. "The source code is the ultimate documentation," he said.

In December, the Commission issued a fresh set of complaints against Microsoft for failing to comply with the part of the inter-operability ruling, saying the documentation the company had provided was "fundamentally flawed" and would not allow developers to create products that could successfully inter-operate with Microsoft's server software.

However, Smith disputed the conclusions of the independent trustee - computer science expert Neil Bartlett - on which the Commission based its decision to issue a new set of complaints. He picked on a specific Bartlett comment that developers would not be able to develop new products in four days using the documentation. Smith's counter-argument was that Microsoft's own engineers would not be able to do it in so short a time either.

The Commission will continue to review the cost of the existing licensing agreements. The source code would be provided to licensees at no additional cost, Microsoft said.

Carlo Piana, a lawyer who represents the Free Software Foundation Europe (FSFE), said it was "unprecedented" for Microsoft to be prepared to give away its "crown jewels" in the form of the source code.

"This shows that Microsoft is more scared of free software than proprietary developers," he said. Piana stressed that the offer of the source code was "useless" to free software developers unless it was offered under GPL terms.

Groups like FSFE and Samba team have complained that Microsoft, by refusing to offer access to the communications protocols under GPL terms, is imposing conditions that would prevent them developing competing products in the spirit of free software.

Piana added that it showed that the Commission's measures were "very effective" and were having a far greater impact on the company than similar steps taken by the US anti-trust authorities against Microsoft.

However, Thomas Vinje, a lawyer working for firms backing the Commission's action including IBM, Oracle and Red Hat called Microsoft's offer a "ploy" that does not address the Commission's concerns on inter-operability.

Developers would have to look through source code to find the proverbial needle in a haystack, he said. He predicted that the Commission would see through what the company was doing and proceed with the procedure to impose a fine. "It's an attempt to delay and avoid compliance with the ruling," he said.