WASHINGTON — As it prepares to present its antitrust case against Intel Corp. to an administrative law judge, the Federal Trade Commission continues to pursue a broader investigation of Intel's chip-design and licensing procedures that could have far greater implications for the PC industry.

Sources confirm that FTC lawyers are probing whether interface changes Intel made in its Pentium chip design represented an improvement in performance or instead created incompatibilities that locked in OEMs.

The change involved replacing the chip-level Socket 7 CPU interface used in Intel's original Pentium with a proprietary Slot 1 interface based on a so-called P6 bus used between the current Pentium II module and the motherboard. The new module encapsulates a fast, low-voltage, wide CPU bus, a separate cache bus and special, dedicated cache SRAMs.

Commission officials won't comment on the probe, but sources said the FTC has received complaints about Intel's growing dominance of core-logic chip sets. Intel's market share is said to have reached 85 percent since the change was made.

While the new interface offers OEMs many advantages, it has not until recently been open. Intel has said little about the P6 bus interface, except that it has patented the technology. Last month, the company said it had licensed the interface to one company it would not name.

Still, observers said the situation has made it tough for OEMs to develop their own core logic or for independent core-logic vendors to operate in the chip-set market. It also makes it all but impossible for Intel rivals Advanced Micro Devices and Cyrix, which don't have direct access to the technology or patents, to develop Slot 1-compatible modules.

Intel spokesman Chuck Mulloy noted that the FTC earlier launched a "very, very broad investigation into our business practices" separate from the current antitrust probe. "There's nothing new on chip sets."

Mulloy said Intel is "willing to license that [P6 bus interface] technology for fair value." In fact, he said, "there are companies out there that are licensed," and Intel is "in discussions with other companies on the P6 bus."

For Intel's foes, however, a broader investigation of the chip maker's design and licensing practices is overdue.

"I think this is a good start," said Steve Tobak, vice president of corporate marketing at National Semiconductor Corp. (Santa Clara, Calif.), which now owns CPU vendor Cyrix.

Tobak said that in years past, standards were effectively open for key components such as memory bus, graphics pipeline, chip-set properties and so on.

"Now, Intel is being selective about whom they license to. That effectively allows them to pick winners and losers," Tobak said. "If the FTC assumes they're a monopoly, then selectively licensing standards becomes an issue."

Pointing to the bus schemes, Tobak noted that anyone could make processors or chip sets using the Pentium bus. By contrast, the "P6 bus is closely held, and Intel will only license it as it sees fit. That standard can enable certain processor and chip-set companies to compete or not."

At the memory-interface level, "the Rambus interface is anointed by Intel. So every memory company has to license Rambus," Tobak pointed out. "Again, defining winners and losers."

The possibility also exists that Intel, now with a graphics-rendering engine in its i740, could redefine that interface and do it selectively, Tobak said. It could do the same in areas such as Ethernet or Super I/O, he added.

Still, Tobak, who has long fought the CPU wars with Intel, acknowledged that market forces have done more in recent months than the government may ever do for microprocessor competition. "I'd have to say this is the best time there's ever been in terms of our ability to compete and to sell against Intel. I almost think the playing field is as level as it's ever been," he said.

Industry observers said the FTC's probe of Intel's business practices is justified, but investigating design issues is another matter. "The government can't get involved in what bus interface" is appropriate, said Michael Slater, editorial director of The Microprocessor Report.

FTC officials, meanwhile, said they hope to go to trial by the fall on the recent antitrust charges filed against Intel. The government complaint alleges that Intel illegally used its market power to deny three customers — Digital Equipment Corp., Intergraph Corp. and Compaq Computer Corp. — continuing access to technical information needed to develop systems based on Intel microprocessors. The FTC said Intel also took other steps to punish the three for refusing to license key patents on Intel's terms.

"If this behavior continues, the road to innovation will have to run through Intel," William Baer, director of the FTC's Bureau of Competition, said in an interview. The antitrust case "is really going to come down to whether Intel's conduct is going to be allowed to continue."

The government will seek to convince an administrative law judge to block Intel from using the threat of a discriminatory cut-off of products or technical information to force its customers to license or sell their intellectual property to Intel.

While Intel's patent disputes with Digital and Intergraph were widely reported to have been a key focus of the antitrust probe, Compaq's involvement in the case remained unclear until last week. Compaq, Intel's largest volume customer, was cited in the antitrust case as a result of its 1994 suit against Packard Bell NEC Inc. for using patented Compaq technology in Packard Bell motherboards. Intel, the supplier of the motherboards, intervened on Packard Bell's side.

Responding to Compaq's assertion of its intellectual-property rights in motherboards, the FTC complaint alleged that Intel cut off technical information Compaq needed to design systems based on Intel's newest Pentium chips.

A Compaq spokesman declined to comment.

The FTC has scheduled a July 10 hearing before an administrative law judge to set a trial, which could be in the late autumn. Intel said last week that it would appeal to a federal court if necessary.

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