Microsoft and the U.S. Department of Justice agreed to a settlement in October designed to address complaints that the software giant was using its market dominance to bully computer manufacturers and others to favor its products.

The settlement, which is being challenged as inadequate by nine states, would give computer makers more flexibility to feature rival software on their machines.

The settlement is not binding until signed by the judge, although Microsoft agreed to comply with certain conditions before then, Jim Cullinan, lead product manager, told Reuters.

The Windows XP Service Pack 1 will be released to more than 10,000 beta testers by the end of May and then made available to the public around the end of August, he said.

The software allows computer manufacturers and users a variety of options in making default settings for certain popular programs including Web browser, e-mail, instant messenger and media player for audio and video.

MORE USER OPTIONS

A new button on the Windows start menu, titled "set program access and defaults," allows users to choose between four default options: computer manufacturer choice; Microsoft only software; non-Microsoft software; and customized settings, which is the default choice.

Users can choose to set defaults to one program but also display alternative programs, or they can hide other programs so that the icons are not on the desktop or in other areas, eliminating easy access to the programs.

Previously, computer makers could set defaults to programs other than Microsoft's but could not hide Microsoft programs, except for the browser, like they can now.

Microsoft allowed computer makers to hide access to Microsoft's Internet Explorer browser after an appeals court in June agreed with a lower court that Microsoft had illegally maintained its monopoly in personal computer operating systems.

MICROSOFT TO SHARE PROTOCOLS

In the coming months, Microsoft plans to share code with competitors that will enable them to write programs that interact with XP in the same way Microsoft programs do, Cullinan said.

Microsoft will release application programming interfaces, code that reveals how a software program talks to the operating system, he said. The company also will license protocols used in communications between desktop Windows PCs and servers, he added.

The company did not decide to release the service pack because of the settlement, but rather because Windows NT code, formerly used in products aimed at the corporate market, is now in XP and being used by consumers, Cullinan said.

Service packs are meant to fix critical compatibility, reliability and security issues in a product until an updated version of it can be released.

"We've never issued a service pack for a general consumer" product, he said.

ANTI-TRUST, SECURITY TRAINING

The service pack will reflect specialized employee training in anti-trust law as well as in secure product design and development, Cullinan said. The company announced a push earlier this year to make security a priority in all its products.

"You will see some fixes based on that work," he said, of the security training. "It's one step. There's still a long way to go."

The service pack will roll up about a dozen or so critical security problems that have already been patched in XP and accompanying programs like Windows Messenger instant messaging, he said.

The software also changes the Passport settings so that they don't pop up soliciting registration until a user accesses a service that requires Passport, such as Hotmail, Microsoft Network or Windows Messenger.

Passport allows users to enter their personal information once and have it accessible by multiple Web sites and services, rather than the user having to enter that data for each new service they sign up for.

The settlement was reached after the appeals court decision ruled that Microsoft was a monopoly but rejected a proposal to split the company in two.

California, Massachusetts and seven other states are pressing for more severe sanctions against Microsoft, such as forcing the company to sell a cheaper, stripped-down version of Windows and giving rivals easy access to detailed Windows code.

About 32 million copies of Windows XP have been sold since its release in October, according to Cullinan.