Microsoft Pact Not Much of a Deal

Following negotiations lasting nearly 10 months, the Fair Trade Commission announced on Feb. 27 that it had reached a settlement with Microsoft Corp. The settlement, however, does not touch upon the problem of the software giant's dominance of the local market, but instead, helps the company solidify its monopoly.

This has led to a problem worthy of serious deliberation – what is the future of the nation's consumers and other software competitors?

According to the commission, the settlement contract comprises eight main categories. Among them are some promises the software company has made for the very first time, including: the ranges of price cuts, a reasonable sharing of source codes with domestic IT companies, Chinese will be the main language used in the license agreement of Microsoft products in this country, that ROC law will be applied to disputes arising from the license agreement and that the company shall not demand that courts outside this country be the competent courts. These are hard-won achievements.

But the commission seems to be overly optimistic if we analyze these promises. Two conditions – that the license agreement is mainly written in Chinese and that ROC law is applied to relevant disputes – actually make no big difference. This is because these two promises only aim at the license agreement for end users. The settlement, however, does not say a word about whether or not they are also applicable to license agreements with IT businesses.

As for sharing source codes, the settlement noted that Microsoft agrees to "reasonably share the source codes." The company, however, said that it does not mean to make public the source codes but actively allow Taiwanese companies to join its "Enterprise Shared Source Code Program." As for the requirement that Microsoft carry out the consent decree it reached with the US government, it does not have much influence, since the product at the heart of the trade dispute – Windows XP – is not included in the US settlement.

When it comes to the price cuts emphasized by the commission, Microsoft responded that lowering prices is not part of the settlement. The settlement document only carries one line – the prices shall be set in compliance with the Fair Trade Law (公平交易法).

The products for which the company agreed to scale down its retail prices account for only about 1 percent of its total sales domestically. The prices of its main products – enterprise authorization and OEM sales – are not adjusted. The price cuts agreed by Microsoft, therefore, have little influence on the company's revenues.

What's more important is that the issue of middleware (such as media players, Internet service and interactive TV software), which took center stage in the lawsuits between Microsoft and US state governments, was nearly left untouched by the commission.

The commission has acted as if price cuts were its ultimate goal from the very beginning, instead of focusing on the establishment of a healthy and fair competitive mechanism. But pricing is not the key to Microsoft's monopoly status. Price cuts alone cannot resolve the problem of the software giant's market dominance, nor can they boost competition.

Institute for Information Industry chairman Huang Ho-ming (黃河明) warned that lowering prices might create greater demand, thereby expanding Microsoft's market dominance. This is not necessarily a good thing for products incompatible with Microsoft, such as Linux.

Considering that government agencies have been generally Microsoftized and the commission has agreed that Microsoft can avert the monopoly issue by some symbolic price cuts, the government should ponder whether it has to continue with Microsoftization, allowing the company to maintain its grip on the nation's knowledge interface. Can the government provide consumers with other choices?

For example, most of the government's bidding projects require the use of Microsoft products and a high percentage of government Web sites use Microsoft software. Such practices gradually shrink the market of other competitive products and reduce the public's choices.

With the settlement, Microsoft will further solidify its dominant status in this country. Whether other rival products will have room for development, how we can boost the nation's IT industry and whether we should make a step toward opening up Microsoft's source code – all these are questions which deserve the government's serious consideration.