Bowing to regulatory pressure, Microsoft plans to offer the upcoming Windows 7 operating system in Europe without Internet Explorer, a company representative confirmed this morning. CNet News.com broke the story, citing a memo sent by the company to PC makers.

It's a significant shift by Microsoft on an issue that traces its roots to its landmark U.S. antitrust case. Competitors argue that the company's inclusion of its web browser in its dominant operating system gives Internet Explorer an unfair edge. The practice has been under renewed scrutiny since rival browser maker Opera Software filed a complaint with the European Commission in December 2007.

The report by CNet News.com's Ina Fried quotes from the memo to PC makers: "Microsoft will not offer for distribution in the European territory the Windows 7 product versions that contain IE, which are intended for distribution in the rest of the world."

The decision applies to copies of Windows sold in stores and distributed to PC makers.

Although it was previously possible for PC makers and consumers in Europe to install alternative browsers, the move means they'll now be starting with a clean slate, without a browser already built into the operating system, potentially leveling the playing field in the eyes of competitors. ln most cases, PC makers are still likely to install a browser before shipping computers to stores.

Microsoft was previously ordered to offer a version of Windows in Europe without its Windows Media Player, but it continued to ship  versions with the digital media software at the same time, negating the effect of that ruling. In that way, the commission's stance and the company's decision on IE appear substantially different -- and perhaps more likely to have an impact on the market.

The situation was foreshadowed in a preliminary "statement of objections" issued by the commission in January. Microsoft described the implications in its latest quarterly filing with the Securities and Exchange Commission.

The statement of objections seeks to impose a remedy that is different than the remedy imposed in the earlier proceeding concerning Windows Media Player. While computer users and OEMs are already free to run any Web browsing software on Windows, the Commission is considering ordering Microsoft and OEMs to obligate users to choose a particular browser when setting up a new PC. Such a remedy might include a requirement that OEMs distribute multiple browsers on new Windows-based PCs. We may also be required to disable certain unspecified Internet Explorer software code if a user chooses a competing browser. The statement of objections also seeks to impose a significant fine based on worldwide sales of Windows operating systems.

More to come.