Subject: M$ Monitor: Global Perspective
Audrie Krause (audrie@netaction.org)
Date: Sun, 26 Apr 1998 22:03:09 -0700 (PDT)
Date: Sun, 26 Apr 1998 22:03:09 -0700 (PDT) Message-Id: <2.2.16.19980426220532.2e874eb8@pop.igc.org> To: roundtable@cni.org From: Audrie Krause <audrie@netaction.org> 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
political issues, and to teaching activists how to use the Internet for
organizing, outreach, and advocacy.
To subscribe to The Micro$oft Monitor, write to: <majordomo@netaction.org>.
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NetAction is seeking sponsors to provide financial support for the continued
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For more information about contributing to NetAction, or sponsoring the
Micro$oft Monitor, contact Audrie Krause by phone: (415) 775-8674, by
E-mail: <mailto:audrie@netaction.org>, visit the NetAction Web site at:
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Copyright 1998 by NetAction/The Tides Center. All rights reserved.
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