Government-Regulated Software

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The software industry in general, and Microsoft in particular, have spent the last twenty years growing from a tiny seed into a giant tree. Annual revenues for Microsoft seem to double every two or three years, and the computer industry as a whole is growing almost as fast. This growth in monetary activity has also had a correspondingly larger and larger impact on the economy as a whole. There are few people willing to debate whether this is good or bad; it is almost universally accepted that "what is good for the software business is good for everyone."

Of course, like all generalizations, this one can be taken to an extreme. I am sure that 40 years ago, there were people in North Carolina who said "what is good for the tobacco industry is good for everyone." Looking at other industries with less obvious health hazards, I am sure that certain members of the petroleum industry enjoy the current run of higher prices, reasoning that "what is good for the oil indusry is good for everyone." And surely the protectionist branch of the auto industry has often suggested that "what is good for Detroit is good for everyone."

It easy to look at the apparently "good" economic conditions, and observe the simultaneous growth of the software business, and connect the two with a casual, almost automatic line of reasoning. But just as in the case of a government-funded tobacco industry, and a government-protected automobile industry, there are always victims. What is good for one industry is not automatically good for all other industries, even if that one industry is the information business. Such sweeping "feel-good" generalizations, and the mindless acceptance of software as the key to a prosperous economy, are dangerously simplistic.

The software barons are attempting to claim an exemption from all government regulation. They seem to believe that if people buy it, it must be universally good; that if one group of people is getting fabulously wealthy, that their impoverished, invisible victims are unimportant; that if you just close your eyes to the "annoying little facts" and close your ears to "whiners and complainers", everything will be just fine. I am sure there were people on board the great ship Titanic who also felt that way.


Realistically, nobody can say for sure what form of software regulation is best. The regulatory entire spectrum, from the current "Wild West" model to a utility-company model of regulated monopoly, is subject to drawbacks or risks. The purpose of this article is not to present an idealistic model for business regulation. Instead, I want to point out some little-known facts that expose the spin-doctors on the Microsoft side as either ignorant or willfully deceptive. It is important for people to know the facts, the realities, and to base their decisions on such realities instead of mumbo-jumbo from the wealthy and influential lobbyists on either side of the issue.

One of the best ways to find out if a certain model of regulation or economic structure would be effective is to examine the historical record. While we cannot be certain that previous examples will always apply in a particular modern-day case, we can at least dispel some of the FUD and the complaints about "unknown risks". For example, we can be sure that an outright ban of liquor does not work, because we have seen the effects of government-mandated Prohibition in the U.S. We cannot generalize this example to claim that Mafia-style software distributors would engage in running gun battles in the street during a "software Prohibition", because Internet distribution would be a swift path around any distribution bottlenecks. But we can see that people will find a way to get what they want if somebody makes it available -- provided there are no secret "hooks" to prevent what they get from working. Liquor is liquor, but software can be anything the manufacturer wants it to be.

The question we should ask, then, is "What prior examples of government software regulation exist already?" Also, we should ask "How effective is this regulatory regime, and why?" Finally, we need to examine the question "How applicable is this example to the current and expected future software marketplace?"


I am holding in my hands an official document from a major telecommunications vendor that specifies the impact of FCC Dockets 90-313 and 91-35. The fundamental feature of these federal regulatory mandates is *equal access to the telephone infrastructure for all telephone service providers*. We know this feature as "10XXX" or the "10" prefix that can be used to dial alternative long-distance providers from any telephone. So everybody gets a "default" long-distance company for their monthly bill, but everyone has simultaneous access to any other provider, as long as the press the right access keys before dialing.

The reason all of this works is very simple: the U.S. government (specifically, the Federal Communications Commission or FCC) has mandated that everyone provider of telephone switching equipment and associated digital control software ensure that equal access exists for any and every provider of telephone connectivity. Yes, the FCC law specifically regulates *software* by name. Nobody can legally make and sell switching system software that favors one long distance telephone company in terms of priority, or audio quality, or reliability. Nobody can sell or provide telephone switching software that makes any of the alternatives more complicated to dial up: 10XXX is required by law to work with everybody's software.

The origins of this law deal with the deregulation of AT&T during its divestiture two decades ago. The government wisely realized that providing the *legal* opportunity to sell software and services is not the same as providing the *technological* opportunity to do so. Selling fruit in a roadside stand is not something that can be prohibited by somebody's technological machinations, but it *is* possible to design computerized products that favor or penalize a particular competitor or set of competitors. We have seen this deceptive form of "predatory programming" used by Microsoft to erect *variable barriers to entry* and *selective barriers to entry* into the software applications business, and by extension to the software utilities and OS businesses.


For example, Microsoft designed their Windows 3.1 to intentionally fail during installation on a DR-DOS PC. We know it was intentional because software codes specifically exempted MS-DOS and PC-DOS from the failure mode. We know that the failure was not a technological necessity because a PC running MS-DOS and Windows 3.1 could be migrated to DR-DOS without damaging the functioning of Windows. However, the PC had to first be running Microsoft DOS before the Windows installation would take place correctly. A later software change provided a workaround for this intentional defect, but by then the damage to the marketplace had been done.

Similarly, Stac Electronics paid a heavy penalty for its 1994 court victory that proved Microsoft illegally used Stacker disk-storage codes in MS-DOS 6.0 Doublespace (also known as "Troublespace" for the pirated code's damaging tendencies). When Windows95 came out, Stacker 4.1 for Windows95 mysteriously no longer worked. Despite the dramatically lowered costs of disk-drive storage, there was still an opportunity to make money targeting the notebook computer market.... but since all new notebooks came with Windows95, Stac was prevented *technologically* from competing, via the artificial barrier to entry erected by Microsoft.

We could list a dozen more cases of Microsoft intentionally raising an artificial, unnecessary barrier to entry into the software market, using hidden software codes. Remember when Windows 3.11 broke the compatibility with OS/2 2.1's WinOS2? Or when Windows95s version 1.33 broke the compatibility with OS/2's memory structure? Microsoft likes to hide behind the terms "proprietary" and "intellectual property", but they are simply using technology to punish competitors. Of course, the only reason why Microsoft would do that is because they cannot compete on a level playing field, since they know their own products are technologically inferior.


It is obvious that you cannot use telephone service without a telephone. Similarly, you cannot use the Web without a Web browser. While we hear a lot about "internet appliances" and "non-PC devices", the major benefits of the Web come when you combine Internet browsing with an information-rich processing environment such as an office suite and Web design tools. This robust environment simply cannot be duplicated in the tiny memory footprint of a non-PC device. Therefore, PC-based Web browsers will remain a vital access method for Internet communication and data processing.

Right now, Internet access is still available through non-Microsoft browsers, but MIcrosoft would like to end this freedom using artificial technological barriers to penalize non-Microsoft products. This is roughly the same technique that a phone company would use if they did not have to obey the "equal access" mandate of the FCC. How would you like to find that switching to AT&T long-distance suddenly required you to buy AT&T telephones, at whatever price AT&T wanted to charge? How would you like to find that AT&T had added this new "requirement" after you had signed a long-term contract with them, by making a subtle change in their switching-system software that specifically targeted your company? If not for the equal-access law, any phone company could rig their proprietary switching systems to favor or penalize anyone based on whatever criteria they chose: race, religion, employer, or telephone hardware.

By the same subtle, secretive methods, Microsoft can selectively penalize people they do not like. Sure, if we were talking about *hamburgers* or *T-shirts*, we could argue that a monopolist does not do much harm to society by discrimination against certain classes or groups of people. After all, there are plenty of other foods besides hamburgers, and plenty of other clothing besides T-shirts. But there is only one Internet. Microsoft would like to be the drive-through operator who says, "I saw you go across the street to Wendy's before we put them out of business. Now that you have to buy hamburgers from us, we are going to make an example out of you. This burger will cost you $8.00." This is exactly what Microsoft "enforcer" Joaquim Kempin has done to PC manufacturers for years, when they meet with him for their annual Windows contract re-licensing negotiations. Now Microsoft would like to be able to selectively punish PC users based on their desired method of accessing the Internet.

Remember, if Microsoft has the power to individually discriminate based on your preferred technology, they also have the power to individually discriminate based on your race, your religion, your nationality, your employer, or any other personal data they can acquire. Should any one company have the power to deny individuals Internet access? Remember, we are not just talking about a single food item among many alternatives -- we are talking about access to the one and only Internet. This is the same Internet that is touted as "vital for universal access" and "necessary for every school child."


Nowhere did the FCC write software codes for the telecom industry. This sort of micromanagement would be slow, counterproductive, and error-prone. Instead, the FCC wisely made a sweeping generalization: "equal access". A "level playing field". No favoritism, no penalties, no discrimination. Equal.

Microsoft complained in their recent court filing in the antitrust case that the DOJ proposal was "vague" and "unenforceable". In fact, Microsoft claimed that it amounted to the equivalent of a ban on pornography by claiming, "I'll know it when I see it!!" Microsoft went so far as to say that "precision-trained engineers" would leave Microsoft because they would be "frustrated" at the prospect of designing software that they "could not be certain was legal or not."

This is preposterous.

Do we really believe that Microsoft only hires people who don't know the meaning of the word "equal"? That is impossible. Only the Clintonian "that depends on what the meaning of the word 'is' is" comes close to such malarkey. Microsoft's so-called "engineers" (a misnomer, as few of them have an engineering degree or an engineering certification from a professional engineering society) are *already* leaving in bunches, realizing that the handwriting is on the wall. Microsoft just wants to use the subterfuge of "vagueness" as a cover for their own mismanagement and duplicity. Microsoft's management knows good and well what "equal" means, and they know how to implement it if they so choose.

The FCC's equal-access provision is ideal, because it is simultaneously *precise* (it is obvious what the word "equal" means) and yet *vague* (it leaves it up to the software designers as to how to implement the equality). This is the main reason why it works so well in practice. Nobody has to worry about which brand of telephone they buy in order to use a particular long-distance company. Meanwhile, no maker of digital switching systems has to worry about conforming to a particular government-directed software regime. One would hope that future courts will hold that the recent Microsoft court decision is essentially an equal-access requirement.


There is one other very important reason why the equal-access government mandate works successfully in the telecom business. Telecom companies are run by rational, reasonable people who know their limitations and are wisely willing to work within the framework of competing rivals on a level playing field. This is also the reason why Microsoft cannot and will not accept equal access to the Internet for all platforms -- not because they are too stupid; not because they cannot afford to; not because of some technological impossibility -- but rather, because Microsoft's management is *irrational*.

Yes, the same kind of irrational, self-defeating mentality that stokes the furnaces of discrimination based on race, or religion, or nationality, is also a feature of the stark, overarching FEAR that motivates Microsoft and its contemptible upper management. They have a fear of a level playing field, of equality, of openness, because these conditions would necessarily expose the intellectually bankrupt condition of the Microsoft approach to business -- copy instead of innovate, leverage instead of encourage, coerce instead of inspire. The source of Microsoft's current antitrust problems is not some capricious outside forces intent on some dark conspiracy.... The source of Microsoft's problems is their own irrational fear of equal opportunity, equal access, and equal accountability.


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