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There has been a flood of announcements in just the past week around AI PCs from Microsoft and its partners. Microsoft led with the launch of its new Surface Laptop and Surface Pro, with similar PCs launching from the leading PC OEMs.
Microsoft also introduced new tools for using, integrating and even building custom Copilot AI agents. Open AI—a key Microsoft partner in the development of Copilot—launched GPT-4o (“o” for “omni”), which provides multimodal interaction, particularly natural voice communications.
The news all looks positive for the advancement of AI, and this is just the beginning. With Computex starting today, there are sure to be more announcements around AI PCs, or what Microsoft refers to as Copilot+PC. On all accounts, this is good for Microsoft, but U.S. and EU regulators may look at it differently.
For a little background, Microsoft—like many in the tech industry—is aggressively working on AI solutions that will improve everything from its Edge Explorer and Office productivity applications to the Teams collaboration environment and developer tools. It is even working with many third-party independent software developers (ISVs) to integrate its Copilot technology to improve the user interface and functionality of the applications.
On the hardware side, Microsoft has lobbied the PC OEMs to add a dedicated Copilot key onto the keyboard to the right-hand side of the space bar and alt key—something that it is also charging a license fee to do.
With OEMs rapidly jumping on board with all new PC processors/SoCs supporting improved AI performance through both a dedicated neural processing unit (NPU) coupled with CPU and GPU processing, Microsoft could potentially gain ground in all hardware and software levels of the PC value chain. I, for one, have started using the Edge browser more often because it has Copilot powered by ChatGPT integrated into it.
A problem could arise, however, if regulators view Copilot as a product rather than a feature. Microsoft faced a similar issue in the 1990s, when the U.S. Federal Trade Commission and Department of Justice took issue with Microsoft tying the sale of applications and the operating system together and later with the integration of the Internet Explorer web browser into the operating system. These lawsuits resulted in settlements that had little impact on the market but resulted in some changes to Microsoft’s business practices.
With a growing number of AI agents available, will Microsoft’s actions to integrate Copilot into its applications and third-party applications, and to physically link it to every PC keyboard, be viewed by regulators as blocking competition in the PC segment?
I believe the similarities are too close to ignore and that it may raise red flags, especially with EU regulators, which most recently took aim at the integration of Microsoft Teams into Microsoft Office—forcing the breakout of Teams as a separate application. Should this Copilot key be programmable for any AI agent and not just Microsoft’s Copilot? With the multimodal capabilities of GPT-4o, particularly natural voice communications that will be integrated into Copilot, the dedicated key may be unnecessary.
Additionally, as other competitive AI agents emerge, the segment may become more competitive. Arguably, Apple’s recent market share gains lend credibility to a more competitive market. However, even with a more competitive landscape, Microsoft’s lobbying efforts to add a dedicated Copilot key and charging a licensing fee for it could face regulatory scrutiny. Regulators could deem these actions as providing an unfair advantage to Microsoft.
If Microsoft does have to fight a regulatory battle, it would be doing so on the heels of many other legal battles that Microsoft and OpenAI are fighting with media outlets over the claim that ChatGPT and Copilot were trained on copyright-protected content.
While it may be too early to determine if regulators will take issue with the integration of Copilot, it is not farfetched to see the potential, and it highlights the challenges that Microsoft and the entire tech industry face as AI changes the industry landscape. Unwilling to miss the AI wave, Microsoft is willing to risk the scrutiny of regulators, once again, by aggressively interweaving Copilot with the Microsoft ecosystem.
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