Microsoft announced Monday that the company will open up its controversial Passport .NET authentication service to make it compatible with services from rivals such as AOL. The change is the latest in a long series of compromises the company has made this year with regard to Passport, in large part because of complaints from privacy groups, lawmakers, and competitors. Microsoft is integrating the Passport service into Windows XP (due next month), which will let users automatically log on to the service when they turn on their PCs.

Privacy groups charged that Microsoft was trying to become a clearinghouse for consumer information, including name and address information, credit card information, and spending data. The groups feared that Microsoft--as sole owner of the information--could sell spending-habit and other information to other companies without consumers' knowledge. Microsoft has denied ever having such plans. "We do not want to be the one authentication scheme across the Internet," said Microsoft Group Vice President Robert Muglia. "We see ourselves as one of many producers."

To open Passport to rivals, Microsoft will incorporate the industry-standard Kerberos 5.0 security protocol into the service, which will avoid the problem that banks had in the early days of ATM technology when, the company says, bank machines couldn't speak to one another. Microsoft's goal is to jumpstart Internet-based commerce.

In a related move designed to soften its image with consumers, Microsoft will rename its HailStorm services--the so-called first wave of .NET-related services the company plans to create--to .NET My Services. Whether this service or the new Passport service flies with consumers remains to be seen, but the company had a difficult time getting people to buy into this plan before the country's economic problems became obvious. Now Microsoft will have to do everything it can to keep the scheme afloat.