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Only the Free World Can Stand Up to Microsoft

  This is the piece referred to in previous AM-INFO postings by Charles
  and by myself. A companion notes file is available from:
  You can write me at: thull@netway.com or ftwalk@contex.com
               Only the Free World Can Stand Up to Microsoft
                                by Tom Hull
   1. The reproduction and distribution cost of software is for all
      intents and purposes nil. This means that in theory it is no more
      expensive to produce software which can be freely distributed and
      used by everybody than it is to produce software for a limited
   2. The pricing of software bears no relationship to the cost of its
      development. The two factors that do matter are market size (which
      is limited by price and utility) and competition. Given a market
      for a software product, the maximum margin can be obtained by
      precluding or eliminating competition.
   3. Software companies that are able to thwart competition attain
      pinnacles of power which are inconceivable in other industries.
      Partly this is due to the enormous cash flows that are possible
      in the absence of competition from products with nil reproduction
      costs, but largely it is due to the complexity of software itself,
      which allows dominant companies to design "standards" which exclude
      future competition.
   4. All niche markets for software rapidly evolve toward monopoly or
      an equilibrium where a small number of players tacitly agree not
      to mutually destroy their profits. (Established companies can
      defend their market share by reducing their prices to practically
      nothing, making price competition suicidal for newcomers.) However,
      there are cases of asymetrical competition, where a large company
      with other sources of income can destroy a smaller company that
      depends on a single niche revenue stream.
   5. Microsoft has a secure revenue stream based on its dominant
      position in personal computer operating systems software, and uses
      the power inherent in that position to favor its other business
      activities with its ability to dictate "standards" and to undermine
      competition, especially where power (as opposed to mere money) is
      at stake.
   6. Capitalists invest in new software ventures with the hope of
      gaining a dominant position in a new niche market. There is
      essentially no new investment in existing niche markets, since it
      is impossible to compete with an established dominant player on
      the basis of lower costs and the possible gains of an uphill
      battle for a small share of a shrinking pie rarely justify the
      risks. In their wildest dreams these capitalists want nothing so
      much as to be just like Microsoft.
   7. The drive to restrain Microsoft under the rubric of antitrust law
      seems mostly to be the effort of companies who find their own power
      positions threatened by Microsoft's activities. They seek to make
      it harder for Microsoft to undermine their own businesses. However,
      they are fundamentally similar to Microsoft in that they don't
      question a world where technology companies working from private
      caches of intellectual property are able to control the use of that
      technology for their own best profit.
   8. In the market equation, demand is equal to, and in many ways the
      master of, production. Yet in the world we live in, production is
      highly organized and efficient and in command of enormous financial
      resources and seductive powers of persuasion, while demand is
      fragmented, uninformed, and powerless. While consumers can still
      kill a product that they have no desire for, nowhere have they
      claimed the right to dictate what they want to see produced. For
      software products, consumers can only choose among a given set of
      alternatives, which are extremely complex, dauntingly impenetrable,
      and generally designed more for the company's anticompetitive
      purposes than for the user's tasks. (Even the old fashioned option
      of doing without is often impossible due to the intricate web of
      interdependencies as new hardware and software march in lock step
      into the future.)
   9. The real "killer software" is free software: software that is
      free of intellectual property claims; that is published in source
      code form, so can be inspected, evaluated, fixed and enhanced by
      anyone with a mind to do so; that is freely distributed and can
      be installed on machines and used without limit. Free software is
      the software that kills the closed, nefarious software product
      industry. It is software that users can select intelligently, to do
      today's tasks, and which they can collaboratively build on to
      handle future needs. Free software is the one thing that not even
      Microsoft can compete with.
  10. Still, there is one core problem: who pays for developing free
      software? The usual answer -- which leads to all of the trouble
      above -- is that investors pay for development, which they
      recover from their profits. The only real answer is that
      development costs must be paid for by users. The key point here
      is that what is paid for is not the distribution or use of the
      software, but its development, and that the development of free
      software implies that it can be used by anyone. I think there is
      a simple way to handle this: anyone who wants a piece of software
      developed or enhanced posts a "request-for-proposal," including a
      sum that the requester is willing to contribute towards its
      development. Intermediary organizations can pool these requests,
      and interested parties can up the ante. Developers can then
      search through the current postings and bid on development work
      or work on spec. Developers can also post their own proposals,
      which users can then buy into.
  11. Free software can be developed less expensively than closed
      software products. Even for well paid professional developers,
      fully underwritten by conscientious users, the cost of free
      software would be significantly less than the premiums now being
      paid for empire building. The quality would be better, especially
      in terms of fitness for use. Free distribution would ensure
      maximum exposure and choice: a free market based purely on
      utility and quality. The service component of software would also
      open up: anyone who wanted to could start from the same code, to
      learn, support, and teach. The best service providers would
  12. Simple steps can get this movement underway: Form an initial
      organization to sort out the technical issues, suggest working
      arrangements, study the economics, hack out a legal framework,
      seed and coordinate the requests, and canvas for initial technology
      contributions (including the large body of currently available
      freeware), do some evangelical work. Urge large companies and
      organizations to budget a small fraction of their annual software
      outlays for proposals. Set up a review group for intellectual
      property issues, challenge dubious claims, and investigate the
      feasibility of buying and releasing rights to valid claims.
      Encourage the development of more local organizations -- local to
      place, to industry, to niche, to taste -- with the initial group
      breaking up or fading away: common methods and procedures, but no
      centralized control.
  13. Let's call this organization, this whole framework, "The Free
      World." It stands for free and open knowledge, free and open
      development, software that works for you. Take a stand. Make a
      contribution. You have nothing to lose but CTL-ALT-DEL.