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From Internet World:

One Microsoft Indivisible
What Happens to .Net If Two Microsofts Emerge?
By John Zipperer

(3/1/01) The last time a seeming monolith of the technology industry got into major antitrust problems, the case ended without a breakup. That case involved IBM and took more than a decade of depositions, years of courtroom time, and millions of dollars to reach the point in the early 1980s when the government called it quits. In the meantime, the technological issue at the heart of the case -- mainframe computers and IBM's control of that market -- had already begun to change, with IBM beginning its long slide from its position of dominance over the upstart PC phenomenon.

The Department of Justice's antitrust case against Microsoft probably reminds  most Americans of the AT&T breakup, but the software barons of Redmond would prefer an outcome more like IBM's -- only in a shorter amount of time. Though its case may not last a decade and a half, Microsoft still has the deep pockets necessary to extend the appeals process for years.

But it's not that simple. Seeing the future of Microsoft involves trying to decipher and predict developments in the arenas of politics, the courts, the consumer and business markets, and evolving technology.

It was against this backdrop of litigation and political uncertainty that Microsoft announced its .Net initiative this past summer. Though .Net itself will take several years to develop in all of its facets, it's not too soon to wonder about its relation to the DOJ antitrust case, a case that in one scenario could result in the breakup of the world's largest software company.

Hedging Forward
David Smith, Gartner Group's vice president of Internet strategies, says that when he tried to ask Steve Ballmer about the post-breakup world, the Microsoft CEO "just changed the subject." Though Microsoft remains tight-lipped about its internal planning, Smith suggests that the .Net initiative can be seen as an "extremely unacknowledged" hedge by Microsoft against a breakup.

In a recent report written for Gartner, Smith flatly states, "Publicly, Microsoft has thus far dealt with the DOJ case through denial. 'Business as usual' is Microsoft's mantra, along with claims of innocence and that there is no Plan B. Gartner finds it hard to believe that Microsoft would not, at least at very high levels within the company, be discussing alternative strategies."

Al Gillen, research manager for systems software at IDC, believes that "any breakup scenarios are so far off that I don't think either Microsoft or any outside observers would expect Microsoft to put its product plans on hold. If anything, they're accelerating their product plans," targeting the sub-PC market, the Internet, and other markets. That includes the markets served by .Net, and if that's where the company, along with many observers, sees a major business opportunity, Ballmer and company are unlikely to sit on their hands until the conclusion of a lengthy court case.

"Microsoft has the financial resources to drag this out for a long time," says Gillen. "From the business-planning perspective, it's not in their foreseeable future to be dealing with the breakup plan."

Shubha Ghosh, a visiting associate professor of law at the University of Buffalo SUNY School of Law, says Microsoft probably does have a Plan B in case it is broken up. Clay Ryder, Zona Research's vice president and chief analyst, agrees, suggesting that Microsoft's leaders have thought of every possible outcome of their current legal woes well in advance. "They're not stupid," he says. "Like them or hate them, it's not a stupid company."

But Ryder dismisses the idea that .Net was planned with a possible breakup in mind, saying the initiative's genesis lays not in politics or legal problems but in a reaction to the market's movement away from the buying, installing, and licensing of software toward a subscription service model. "They're reacting to that movement in the market."

Microsoft can benefit in either case. If there's a breakup, it has a new business initiative that may give one of its surviving parts strength in the non-Windows markets, including Linux. If there isn't a breakup, .Net can help Microsoft's existing lines buffer the company against a surge in Linux.

One Microsoft, or Many?
The government's proposed plan for Microsoft includes both behavioral and structural remedies. The behavioral remedies address such issues as the company's agreements with partners and vendors. But the structural remedy would deal the company a real body blow: a breakup of Microsoft into two entities -- an operating system company and an applications company, with .Net likely to be a part of the applications company.

Gartner's Smith suggests that hobbling the Microsoft OS company with behavioral rules "may hasten the demise of the Windows OS, increasing the likelihood that the Microsoft application company would support alternative operating systems such as Linux. We have already seen signs of Microsoft's interest in .Net on Linux."

But even with the divestiture, Microsoft will continue to be a large and powerful company, says Gillen. If broken up, it would become a number of powerful companies. Dividing teh OS side from applications would provide some degree of separation, "but it also means that each of those companies will be predatory in its own market."

On the other hand, a successful legal defense by Microsoft would likely free up the company to marry .Net and Windows, or at least allow the two to go courting. In that case, "I think you will see .Net stay more tightly coupled to Windows," says Smith. "It becomes a layer on top of it -- an abstraction layer, a productivity layer. it's potential in life beyond Windows would become much less likely."

If the whole suit gets dismissed, I would imagine there'd be business as usual," says Ghosh. "But at some level, Microsoft would be more cautious."

Politics and Poker
Microsoft is famous for proclaiming its innocence and claiming that it will prevail in the legal fight. In an online letter to shareholders included in its 2000 annual report, chairman Bill Gates and president and CEO Steven Ballmer give Microsoft a healthy share of the credit for the economic boom of the 1990s: That is one of the reasons why we believe the appellate courts will rule in Microsoft's favor ... and uphold the well-established legal precedent that U.S. antitrust law should encourage, not discourage, firms to improve their products rapidly to meet customer needs," they write.

It can also keep an eye on the change in administrations in Washington, which brings with it the possibility of a different approach by the DOJ. In addition, some observers believe the appellate court may overrule at least part of the recent ruling against Microsoft.

But there's only so much to be expected from any political solution. Even if the DOJ wanted to drop out completely, there are still 19 states that are party to the case, and they could pursue it far into the future. Therefore, the DOJ may wish to stay involved, at least so that it could continue to have a say in the course of the case.

Ghosh says that the entire matter gets legitimately complicated thanks to the blurring of the lines between operating systems, applications, and services. But he adds that whereas the government's case against IBM two decades ago was "a complete disaster" because the government lacked understanding of the technology, DOJ has learned a great deal about both technology and about antitrust cases in the meantime.

But Zona's Ryder isn't impressed by the government's savvy so far, calling its antitrust case "misguided from the start." And figuring out where .Net would end up after a possible breakup becomes an exercise in splitting hairs. If .Net were to end up as part of an application company after a breakup, Ryder believes there would still be a lot of upside built into the OS company's future. "Windows is not going away," he says. "They can restrict it as much as they want, but the truth is if I can not go tomorrow and buy another copy of Windows for my business, I'm screwed."

Internet Whirl 
Looking for Opportunities in Globalism
By John Zipperer 

(2/22/01) Talking to 3565 Inc. CEO Bob Adams is like getting a data dump; the information comes so rapidly it is all you can do to find places in your brain to store it until you have a second to reflect. Luckily, it's worth reflection, and he's banking on that being the case if his long-term efforts to drum up investor support for his company are to succeed.

Adams first described to me his troubles getting venture capitalists interested in his dot-com idea. He blamed the priorities of the VC world, in which investors chased hype and pie-in-the-sky business plans instead of his own. No doubt, many business leaders who couldn't get investors have had the same complaint. And like many of them, Adams thinks his idea is a no-brainer. After speaking with him about it, I think it's probably hard for folks to get a grasp on it simply because it does lie outside the expected business models. That doesn't mean, however, it's not noteworthy, and after all, we'd all like to think the Net allows ideas from the fringe to get attention.

Adams heads up the Global Development Center (GDC), a nonprofit devoted to developing a "global community center on the Internet." He sees that as the key to the future -- for everyone.

As he told the London Stock Exchange meeting, Adams believes that if the global future is to work for individuals and corporations, people need to be ever more interconnected. As part of that, he means to connect -- through Net-based communities -- folks not normally targeted by online communities, mostly people from different countries and income levels. That's a tall order, and there's no clear way to accomplish it. He's starting small on his GDC site, providing some news and other community features for people. He'll need much more to make a real impact. Some of that "more" he hopes to find through various projects at 3565. One gets the idea that he has a flexible plan; if what he's offering doesn't work, he'll move on to his next idea.

For Adams, the biggest hurdle to clear with investors may simply be that he's coming from the nonprofit world. To bottom-line VC folks -- and probably to most people -- the nonprofit world is something to which you give charity donations, not something in which you invest. But that space is where Adams hopes to plant his business, and he's not aiming to get guilt-based investment; he's aiming for profit-based investment. He's got a plan that he believes will repay his investors, help the communities with which he works, and help fund his nonprofit organization.

So he started a for-profit company called 3565 Inc., which he intends to use to do contracting work for projects in which his nonprofit organization is involved. With his nonprofit GDC devoted to building a global community of interconnected citizens, many of Adams' ideas build off that base. One such project he hopes to develop would use 3565 to run online learning courses for participants on various topics. Because he's hoping to charge only modest fees to the students, he'll need to draw on that developing global community -- and hope that they feel like they're part of a real community, which means taking an interest in where their money goes and the work that it supports. That's probably a tough sell to investors.

Adams sees his big opportunity in the issue of foreign remittances. Those are the monies sent by emigrants back to their families in their countries of origin, and Adams says it's a significant market of tens of billions of dollars a year. Currently, the emigrants use Western Union or other companies and pay a nice chunk of money to them in fees. Adams thinks he can leverage his global community, his nonprofit connections, and an Internet-based system to provide the same service to the emigrants at lower cost but at a profit to his group. One of his advisors to GDC has devised a plan for Adams' group to become the new middleman in the matter of foreign remittances to Ghana, and that's where he'd like to run a pilot project to show to potential VC investors. For now, he's hoping to attract angel funding to take care of the pilot.

Besides his enthusiasm and nonstop ideas, Adams has another advantage over other nonprofits when he talks to the business world: He understands and is enthusiastic about globalization. Far from fearing the porous national boundaries and intermixing of nationalities that ties many in knots, he is doing what he can to accelerate it.

Internet Whirl 
Whatever Happened to Good Internet Fraud? 

By John Zipperer 

(2/15/01) All I ask is that technology save me from ever making a mistake, and if it should fail that first test, then it will correct my mistake. Pretty simple, right? So last week, when I made a boneheaded mistake in this column by referring to Colin Powell as the defense secretary (he's actually secretary of state), I mused to one reader that I should investigate software that would let me go into the e-mail in-boxes of our subscribers and correct the mistake right there on their computers. Funny, I thought. But then I started hearing more about e-mail wiretapping, and I began to wonder if my wish were that impossible to grant after all.

When you read the words "e-mail wiretapping," you may be thinking about the FBI's ham-handed attempt to install its evil Carnivore software on various ISPs to monitor e-mail messages for threats to the republic that might be worse than a government monitoring its citizens' private messages. Not that I have any thoughts on that matter, but in this column I'm talking about a different kind of e-mail wiretapping, which is the term used by Privacy Foundation's chief technology officer, Richard Smith, in his recent alert regarding a troubling e-mail scam.

It works like this. Scam artist XYZ sends me an HTML e-mail asking me to interview his boss. I forward the message to a co-worker, noting in my message that scam artist XYZ is a real scam artist and maybe adding other choice comments. My co-worker thinks that's pretty funny, so she forwards it to all of her former co-workers at dot-com ABC. Now, all through this, XYZ is getting a double treat: He not only gets a copy of all of our forwarded messages -- so he knows my choice comments about him -- but he gets the e-mail addresses of everyone who's been forwarded the message; all of that gets sent back to him each time the message hits another recipient's HTML-compatible e-mail program, and the JavaScript code embedded within it does its dirty work.

According to Jahan Moreh, chief security architect at Sigaba, the important thing is that this is difficult to deter, because the mischief is run out of your computer; it's not something intercepting, unencrypting, and reading your e-mail as it's sent over the network. "It is not an attack on the network, it is an attack on the memory of the operating system," he said, and that's difficult to watch. "Content of a message once it arrives at the workstation is extremely difficult to deal with."

But not impossible. The first thing you can do is turn off the JavaScript enabling for your Outlook, Outlook Express, or Netscape 6 e-mail program (though not for the browser). Another option Moreh suggested was to accept only digitally signed JavaScript; not everyone can do this, but if it's possible, it'll weed out those whom you don't trust. He also said enterprisewide measures can be taken against such threats.

As anyone knows who follows this field, it's ever-evolving, and it requires ongoing education of users. "Threats are always going to be there," said Moreh. "That's why it's very important that whatever implementation you do is published and peer reviewed."

So much for the quick fix I -- and probably you -- desired.

(Internet Whirl is a weekly column written by John Zipperer, associate managing editor of Internet World magazine. It appears in this newsletter every Thursday.)

Internet Whirl: 
Powell's Marching Orders May Awaken Online Media 
By John Zipperer

(2/8/01) The new head of the Federal Communications Commission has kicked off his chairmanship by signaling his intention for his to be less interventionist than previous commissions. Well, "signaling" is too vague; he stated it outright. Therein lies both a warning to those interested in topics like a diversity of news and opinions in our country and an opportunity to put up or shut up to those of us who believe the Internet offers the best chance to achieve it.

Michael K. Powell, the new FCC chairman and the son of the new secretary of state, let it be known that we could expect a more laissez-faire direction of the commission under his leadership. And though the two main political parties tend to take different approaches toward using regulation to spur competition and diversity, we can take him at his word regarding his intentions. Wednesday's New York Times quotes Powell as saying that he believes "deregulation is ... a critical ingredient to facilitating competition, not something to be handed out after there is a substantial number of players in the market."

But just what will be different now? Would the new FCC have gone against the AOL Time Warner merger? It didn't before Powell took over, and it certainly doesn't look like it would now. We've already seen -- under the supposedly non-laissez-faire administration -- relaxation of rules controlling the extent of media ownership in various markets, and it's been accompanied by a wave of media mergers. This scares the bejeebers out of people who are worried about consolidation of news in the hands of fewer, especially because they fear that those "fewer" will also be less likely to do investigative reporting on corporate and government wrongdoing, reporting that makes for disturbing reading but contributes to democratic self-rule and more efficient business.

Powell, speaking at a press conference, also addressed the digital divide -- the idea that poorer people are being left behind with inadequate or even nonexistent access to opportunities presented by the Internet. "I think it's an important social issue," he said, "but it shouldn't be used to justify the notion of essentially the socialization of the deployment of the infrastructure."

Well, as much as libertarian fire-breathing is popular on the Internet -- and I agree to a large degree with it -- the fact remains that the Internet didn't spring out of the private workings of a tinkerer in his garage. It was created by the U.S. government, which by definition is the embodiment of American socialization.

But complaining is unlikely to change things. I think a more successful strategy will be to use the tools of decentralization that have been developed via the Internet to develop those multiple voices, so that as your local paper tanks or is merged with the local broadcasters, you still have independent sources of information about business, government, culture, and everything else needed to help you make the right decisions about your business and life.

But let's set some high standards and guidelines to follow. After all, just having more voices doesn't necessarily contribute to better information coming out. Anyone who's spent time in a consumer chat room and watched people argue ad infinitum about the merits of Kirk versus Picard will know the truth of that. What's needed is a lot of voices that have explored and researched their topics and that are open to hearing differing opinions and sources of information but are mature enough to sift through them and put forward worthwhile ones to share with the audiences.

None of this requires pumping into the Net another billion dollars in government or VC or angel funding or funding from any other source to develop new technologies. Let's use the text and audio and emerging video that are already available to make the Internet the place to find vibrant and trustworthy information sources. After all, that's what Powell thinks will happen and the pro-regulation folks hope will happen. Let's just call everyone's bluff and get on with it.