<nettime> M$ Monitor: Global Perspective

[Phil Agre <pagre@weber.ucsd.edu>]

{P. Agre: [I have taken the liberty of formatting this to 74 columns.]}

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Date: Mon, 27 Apr 1998 01:40:43 -0700
From: "Nathan Newman" <nnewman@ix.netcom.com>
Subject: M$ Monitor: Global Perspective 

The Micro$oft Monitor
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Published by NetAction          Issue No. 28                 April 27, 1998
Repost where appropriate. Copyright and subscription info at end of message.
* * * * * * *
In This Issue:
A Global Perspective on Microsoft
Microsoft Out of California's University Technology Deal
After Microsoft
Open Cyberspace
About the Micro$oft Monitor
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A Global Perspective on Microsoft

While most attention on Microsoft has been focused on investigations by
the United States Department of Justice, the reality is that Microsoft is
facing legal investigations of its predatory and monopolistic practices
from governments around the world.  This issue of the Microsoft Monitor
will detail some of those investigations.  With over 50% of its sales
occurring outside the United States -- a share that is growing each year
-- legal challenges to Microsoft in other nations are as important as the
Justice Department's investigation here in the United States.

This article was prepared by Nathan Newman, NetAction's Project Director
for the Consumer Choice Campaign.  Contact Nathan with questions or
comments.  Email: nathan@netaction.org or <mailto:nathan@netaction.org>

Microsoft's global alliances and deals are as pervasive as they are
because those foreign sales are much more lucrative for the company.
Microsoft generates about $500,000 in revenue from each employee in
the United States, but almost $1 million in revenue from every overseas
employee.  This is a phenomenal return, and sales are growing 50% a
year in places like Africa & the Middle East, and doubling each year in
countries like China.

This global growth is a crucial part of Microsoft's long-term monopoly
strategy, so NetAction lauds the investigations by foreign antitrust
authorities and urges the Justice Department to coordinate its
investigations with those other governments.

===== The European Union

Since last fall, the European Commission -- what the European Union
calls its set of government agencies -- has been paralleling the Justice
Department's investigations into Microsoft.  The European Commission's
first area of concern were contracts with Internet Service Providers
which required exclusive promotion of Microsoft browsers.  In early March,
with the U.S. Justice Department making similar investigations, Microsoft
altered its contracts to give ISPs the freedom to support alternative
browsers.

The European Commission also played an important role in forcing Microsoft
to stop interfering with the development of a key UNIX competitor to
its Windows NT operating system.  Back in the 1980s, Microsoft had
developed its own version of UNIX called Xenix.  A part of that code was
incorporated into a version of UNIX owned by AT&T at the time.  When the
Santa Cruz Operation (SCO) acquired that version of the UNIX operating
system in 1995, Microsoft used court orders to not only collect royalties
on the old code but prevent SCO from developing more advanced versions of
UNIX that would no longer use Microsoft's code.

With Microsoft's legal demands hampering SCO's ability to innovate around
its operating system, and costing SCO $4 million per year in royalties
to Microsoft, SCO filed a complaint with the European Commission in
January 1997.  (Microsoft's actions are ironic in light of the company's
complaints about legal actions restraining its innovation.)  The
Commission agreed that Microsoft's legal actions had "hampered (SCO's)
ability to compete with Microsoft's own products, particularly Windows
NT." Before the Commission took final action, Microsoft, in November,
notified the Commission that it would waive both royalties and
requirements that its code be incorporated in future versions of UNIX
worldwide.  This is an important victory in assuring that UNIX remains a
viable competitor to Microsoft on business machines.

===== Japan

Japan began its investigations of Microsoft later than both the United
States and Europe, but Japan's Fair Trade Commission has made up for it in
the aggressiveness of its efforts.  In early January, amid suspicion that
the company was violating anti-monopoly laws, investigators from Japan's
FTC searched Microsoft's Tokyo offices.  With the evidence they collected,
the Fair Trade Commission announced a full scale antitrust investigation
of Microsoft.

Japan's first major concern parallels the U.S. Justice Department's
opposition to Microsoft requiring the "bundling" of the company's Internet
Explorer browser as a requirement for computer manufacturers to license
Windows 95.  The Fair Trade Commission has charged Microsoft with unfairly
pressuring those manufacturers.

The Japanese government's second major concern focuses on Microsoft's
bundling of Office software applications.  Microsoft is charged with
using the bundling of software to unfairly compete against a Japanese
word processor called Itchitaro. Japan is exploring whether Microsoft
made installation of Microsoft Word and Excel a precondition with some
manufacturers for licensing Windows 95.

===== Brazil

While much of the third world has not had the economic or political
clout to take on Microsoft, Brazil's Justice Ministry this month opened
an investigation into Microsoft's Brazilian subsidiary over alleged
violations of antitrust law.  Microsoft's Office suite of applications
already dominates 95% of the Brazilian market and the newest complaints
focus on Microsoft's Money financial software.  Microsoft has attempted
to lock-up the marketplace by giving its Money software away to Brazilian
banks and bundling it with a general package of software for small
business.  Paiva Piovesan, a local competitor which makes a rival package
called Finance for Windows, has charged Microsoft with unfair competition,
and the Justice Department has followed up with its own investigation.

===== Israel

In Israel, the Antitrust Authority is considering declaring Microsoft
a monopoly under Israel law and subjecting it to new restrictions.
Authority director David Tadmor sent a letter several months ago to
Microsoft and informed it that the authority was considering declaring
it a monopoly. The effort was launched in response to complaints from a
number of sources regarding Microsoft's activities in Israel.

===== Grassroots Global Activism

Even in places where Microsoft has threatened or cajoled support from
local governments, grassroots activists are raising concerns about
Microsoft.  In the Philippines, activists within that nation's Green
movement have criticized their own government for accepting $1 million
in free software from Microsoft while, at the same time, launching raids
on local public schools to root out software piracy at the behest of
Microsoft.  Accusing the government of being bribed, the Philippine
Greens have suggested that, "The government may now hypocritically conduct
police raids on others who continue to do as the government did, copying
commercial software."

Microsoft's competitors and local activists around the world have
charged that Microsoft has used anti-piracy campaigns as part of its
anti-competitive practices in the third world.  One example, uncovered
by the magazine Mother Jones, was the case where Antel, the national
telephone company of Uruguay, was caught pirating $100,000 of software in
1995 by the Business Software Alliance.  At the time, the BSA was funded
by Microsoft, Lotus, Novel and other companies.  After the BSA launched
the legal case against Antel, Microsoft used this as leverage to get Antel
to exclusively use Microsoft software -- and then pressured BSA to drop
its suit.  Lotus and Novell dropped out of the BSA's foreign operations
soon after, with Novell citing this and other instances of Microsoft abuse
of anti-piracy campaigns as a reason.

Many other activists have complained of Microsoft's close collaboration
with authoritarian governments.  In China, Microsoft in 1996 cooperated
with police raids on computer software stores after anti-Beijing phrases
were discovered in Microsoft software produced by Taiwanese contractors.
Microsoft halted sales of its Chinese-language operating system until the
ideological content met with the Chinese government's approval.  At least
in the case of ideological censorship, Microsoft seemed quite happy to
accommodate that government's requests for regulation.
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Microsoft Out of California's University Technology Deal

On April 16, the California State University system announced that
Microsoft Corporation had been dropped from the proposed $3 billion
ten-year partnership that university officials had proposed to manage
technology systems for the entire university system.  Citing grassroots
protests, the officials, in the words of the Los Angeles Times, "did not
want to be dragged into the debate over whether the software giant is a
monopoly."

Richard West, Cal State's senior vice chancellor for business and finance,
said it made little sense to keep Microsoft as a partner "from a political
point of view...it's not worth the political costs."

After hearings at the California Legislature in January demonstrated
widespread student, staff, faculty and public opposition to the monopoly
deal being proposed with Microsoft, GTE, Hughes and Fujitsu, university
officials were forced to scrap their initial plans for the so-called
California Education Technology Initiative (CETI) and begin renegotiating
the deal without some of the monopoly concessions in the original
proposal.

Without those provisions, however, the partners, especially Microsoft, no
longer showed much interest in guaranteeing the $300 million in loans they
had originally promised for upgrading technology and telecommunications
systems throughout the university.  As NetAction noted earlier, the
proposed CETI deal was a financial boondoggle for taxpayers in the state.
Without the ten-year captive customer base promised in the original deal,
it's hardly surprising that the corporate partners are not as eager to
sign onto a deal.

Hughes was also dropped from the negotiations, but no deal with GTE or
Fujitsu is in sight.  The state Legislature made it clear that they wanted
to hold hearings before any new deal was approved.  Consequently, with the
spring school term about to end, there is an understanding that no deal
will be approved until a full review can take place in the fall.

Given that Microsoft, GTE and university officials hoped the deal would be
quietly approved last fall, it is a victory that students, faculty, staff
and the public have won the right to further review before any deal is
approved.

NetAction will continue to monitor the CETI proposal, given our continuing
concerns.  While Microsoft will no longer be a full partner in the deal,
we want to make sure that no exclusive licensing deals are signed with
Microsoft.  Also, GTE's continued participation in building a private
telecommunications network could be a threat to telecommunications
competition in the state.

For background on CETI, see the Micro$oft Monitor No. 20:
<http://www.netaction.org/monitor/mon20.html> and subsequent issues.
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After Microsoft

For a speculative look at what the world of software and information
technology will look like A.M.-- after Microsoft -- check out the article
"After Microsoft" at <http://future.sri.com/bip/ScanTOC/AM-S2133.html>.

The article was written by Bob Jacobson, senior consultant with the
Business Intelligence Center at SRI (and also a member of NetAction's
Advisory Board).  Jacobson looks beyond the new millennium and envisions
a world in which Microsoft has been divested into five separate companies:
the BabySofts.  By pondering the unthinkable (a world without Microsoft
as we know it), Jacobson identifies discontinuities and other currently
dormant factors that are likely to play an important role in any
transformation that the computing and networking world will experience
after Microsoft.
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Open Cyberspace

(An earlier version of this article was published in NetAction Notes No. 36.)

Bill Gates may envision the Internet as one vast toll-road for the
Microsoft monopoly, but that isn't a vision shared by Brian Behlendorf,
Eric Allman, Greg Olson, Larry Wall, Paul Vixie, or a host of other
software developers whose names are not nearly as well known, but whose
work we rely on every time we visit cyberspace. What these individuals
have in common with each other -- and what distinguishes them from Gates
-- is that the products they developed are available for free to anyone
who wants to use them. Behlendor lead the team that developed the Apache
web server, which runs more than 50% of all Web sites; Allman and Olson
are responsible for sendmail, the program that routes more than 75% of the
Internet's email, Wall developed the Perl computer language used to create
and manage most web sites, and Vixie is responsible for BIND, the software
that provides the domain name service (DNS) for the entire Internet.

These individuals, and other software developers who create "freeware"
products, do so with publicly available source code, rather than
proprietary source code like that used by Microsoft. The non-profit
Software in the Public Interest uses the term "open source" to
describe software programs created from publicly available source code
and distributed for free. For a complete description of "open source"
criteria, see <http://www.opensource.org/>.

Earlier this month, Tim O'Reilly, CEO of O'Reilly & Associates, convened
a gathering of the developers of key Internet technologies, whom he
described as "open source pioneers." The meeting in Palo Alto, CA, was
a forum for exploring ways to expand the use and acceptance of freeware
development as a business model. A report on the O'Reilly forum, including
a complete list of the software developers who participated, is at
<http://www.oreilly.com/>.

NetAction Advisory Board member Judi Clark attended a press conference
at the conclusion of the meeting. Judi sees the gathering as important to
ensuring that the Internet remains open an accessible.

"One point that came out clearly was the need for the public to see and
understand the significance of this model of software development, and
its prevalence in our lives," said Clark. (For more on the significance of
freeware, see Keith Porterfield's article "Software Wants to be Free," at
<http://www.netaction.org/articles/freesoft.html>.

The conference participants identified several reasons why the "open
source" model of software development is so important to the future of the
Internet:

1) Open source software is already running a significant portion of
the Internet. This suggests that a collaborative business model, based
on shared knowledge, can be as operationally feasible as a competitive
model based on proprietary knowledge and private control of standards for
interoperability.

2) Open source software development has already spawned numerous new
businesses and businesses models, some focused on driving down the cost of
distribution, and others targeting the need for customer support.

3) Open source software has social values -- such as a broad distribution
of labor, and competition focused on implementation, rather than control
of, standards -- which overlap the emergence of new business models.

John Gilmore, another open source "pioneer" who attended the O'Reilly
conference, pointed out another social value -- freedom to innovate.

"Companies like Microsoft are working hard to make it impossible for
anyone but themself to provide innovations," he noted.  "They fear a
loss of control.  Freeware creators, maintainers and distributors have
discarded the idea of controlling the market.  Instead, they stay ahead
of the competition by *doing a better job*.  If they stop doing a good
job, they get bypassed."

4) Open source software development demonstrates new ideas by promoting
widespread use of new products, one example of which is the evolution of
the web browser. In its first, text-based form, the browser was created by
Tim Berners-Lee at CERN (Centre Europe'enne pour la Recherche Nucle'aire).

5) Open source software development promotes consumer choice and helps
keep the market honest. With the typical proprietary model of software
development, companies are often compelled to market software with "bugs"
in order to meet the demands of investors, and consumers are expected to
accept the marketing, for profit, of defective products. Moreoever, when
new versions of the product are released to correct the "bugs" found in
the initial product, the new versions introduce yet another set of "bugs"
which will eventually be fixed by yet another release.

Judi Clark is optimistic that the Palo Alto meeting will lead to further
discussions, and to increased awareness among Internet users of the
importance of supporting the continued development of software based on
publicly available source code.
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About The Micro$oft Monitor

The Micro$oft Monitor is a free electronic newsletter, published as part
of the Consumer Choice Campaign <http://www.netaction.org/msoft/ccc.html>.
NetAction is a national, non-profit organization dedicated to educating
the public, policy makers, and the media about technology-based social and
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organizing, outreach, and advocacy.

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Copyright 1998 by NetAction/The Tides Center.  All rights reserved.
Material may be reposted or reproduced for non-commercial use provided
NetAction is cited as the source.  NetAction is a project of The Tides
Center, a 501(c)(3) non-profit organization.
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