> 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.
>
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> For more information about contributing to NetAction, or sponsoring the
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>
> Copyright 1998 by NetAction/The Tides Center. All rights reserved.
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