Nader's Microsoft Agenda: Progressive Nonprofit Plan for 'Free' Software

By Patrick Reilly
web posted June 1999

Among the self-proclaimed "consumer advocates" urging on the Justice Department's antitrust suit against Microsoft, one stands out.

The leading critic of Microsoft and its alleged anti-competitive activities is Ralph Nader, whose 30-year crusade for government regulation and court supervision of business activity has made him America's most prominent leftist activist. For several years, Nader has lobbied Assistant Attorney General Joel Klein to vigorously pursue Microsoft in court, even when it seemed the government had little chance of securing a ruling against the software giant.

Recent media reports suggest Klein may win his case, although the result is far from certain. Nader and his allies have encouraged premature discussions of "remedies" to punish Microsoft and prevent its future dominance over the software market. These remedies include splitting up the company, requiring Microsoft to give competitors equal access to technical information needed to make software work well with the Windows operating system, and imposing court oversight of Microsoft licensing agreements with computer manufacturers and retailers.

The prospect of splitting Microsoft into several "Baby Bills" (a reference to Microsoft CEO Bill Gates) has attracted the most media attention. But is that what Nader wants? What is his goal for Microsoft, and how does it fit into his broader plans?

Nader and his allies have aligned themselves with Microsoft's business competitors. (See Organization Trends, December 1997, at the Capitol Research Center web site at But it seems unlikely that Nader would invest so much effort into tearing down one large company, only to let its equally aggressive competitors — like America Online (AOL), Hewlett-Packard and IBM — usurp Microsoft's place. Indeed, Nader unsuccessfully lobbied Justice to intervene in the merger of AOL and Netscape Communications. He showed no allegiance to those companies or to Sun Microsystems, which has been promised key concessions as part of the merger deal.

It seems that Nader's leftist ideological bent drives his efforts. Microsoft's destruction may only be one aspect of Nader's politics, not his ultimate goal. A review of the statements and activities of Nader and his allies over the past several months suggests that Nader's target may be much larger than the software king: he is targeting the software industry itself.

In June 1998, Nader sent a letter to Assistant Attorney General Joel Klein, suggesting strategies for the Justice Department's antitrust assault against Microsoft. The letter was co-signed by James Love, a leading critic of Microsoft and director of the Washington, D.C.-based Consumer Project on Technology (CPT), an affiliate of Nader's Center for the Study of Responsive Law.

Despite the many allegations about Microsoft's "misdeeds," Nader and Love asked Klein to narrow his focus. They wanted the Justice Department to challenge the "barriers to entry faced by alternative operating systems" and to address "the concerns of the free software users and developers."

"People in the free software community are concerned that Microsoft, or its business associates, may create barriers to access to important technical information needed for free software development," wrote Nader and Love. "...[W]e ask that DOJ meet with persons in the free software development community... before DOJ becomes too committed to a particular course for the current litigation or the eventual remedies addressed in settlements."

The letter is evidence of Nader's commitment to "free software," a radical concept that will remove most software from the store shelves if the concept succeeds. The thinking goes that software developers will voluntarily create and improve software products. The "source code" or basic recipe for each program will be released the general public, essentially draining all economic value from the product itself.

Sound crazy? Amazingly, many software developers and computer-age philosophers have joined the "free software" or "open source software" (OSS) movement. And that movement is growing strong, with the support of leading companies like Netscape. For Microsoft's competitors, OSS may be only a temporary detour to do irreparable damage to Microsoft. But for Nader and his allies, OSS is a long-term opportunity to significantly alter — if not completely eliminate — the software marketplace.

Free Software, Anyone?

How could anyone but a radical anarchist support a concept like "free software"? It may seem like a boon for consumers. But they should realize that a market totally free of prices is not likely to produce quality merchandise and will quickly collapse.

Actually, the "free software" movement is not opposed in theory to software sales, although some idealists oppose it. The word "free" refers not to price, but to the removal of restrictions on copying, distributing, altering and redistributing software once it is purchased or otherwise obtained.

According to the Boston-based Free Software Foundation (FSF), free software involves three levels of freedom:

  • "The freedom to study how the program works and adapt it to your needs.
  • "The freedom to redistribute copies so you can share with your neighbor.
  • "The freedom to improve the program, and release your improvements to the public, so that the whole community benefits."

Free software advocates disparage makers of "proprietary software" — their term for software that is sold by companies with strict restrictions on copying and distribution. Makers of proprietary software, which includes most software purchased in stores today, do not reveal the software's "source code" — the basic recipe of the program that enables it to perform its unique functions. Without the source code, it is virtually impossible for anyone but the manufacturer to alter the software.

For FSF, successfully implementing the free software concept will require such radical steps as overhauling the patent system. "The ultimate goal is to provide free software to do all of the jobs computer users want to do — and thus make proprietary software obsolete," FSF says.

Confusion about the term "free software" and its implications for pricing have motivated some supporters to advocate an alternate term, "open source software" (OSS). Last year, software developers in California launched the Open Source Initiative and applied for tax-exempt 501(c)(3) status. The Initiative has registered "Open Source" as a trademark with a binding legal definition, and despite protests from free software purists, the term OSS appears to be favored by the media (and will be used in this article).

According to the Open Source Initiative, the advantage of OSS over proprietary software is the ability of computer programmers to improve and customize programs without legal ramifications. Increasing numbers of personal computer users have the technical knowledge to create and alter software, but they are frustrated by software makers' refusal to release source code. OSS advocates argue that lifting restrictions on software will enable hundreds, perhaps thousands, of individual "hackers" to improve the software for everyone's benefit.

"When programmers on the Internet can read, redistribute and modify the source for a piece of software, it evolves," says the Open Source Initiative. "...[T]his rapid evolutionary process produces better software than the traditional closed model, in which only a very few programmers can see source and everybody else must blindly use an opaque block of bits."

The concept would appear to benefit consumers. OSS advocates' claims have merit if a sufficient number of programmers are willing to donate their time improving software (a doubtful prospect over the long term) and then distributing it widely to potential users — probably through the Internet. No software company, which is limited by the number and cost of its employees, could produce and improve software as quickly as many volunteer programmers working simultaneously and sharing their results on the Internet.

But OSS has a fatal flaw: it is based on a false theory of production. For the sake of an imagined voluntary cooperative, OSS rejects free market competition and loses the market's distinct advantages to meet consumer needs with quality products and targeted marketing. In a free market, identifiable manufacturers own the product. They are responsible for product performance, and they can be held liable for inexcusable flaws.

There is no doubt that OSS can be applied to a limited number of software products for a limited period of time. But what happens when the OSS method of production is applied to thousands of software applications with millions of users requiring product support and attention to their particular needs? How do consumers identify the products they need when software is constantly evolving and there are no standard products that enable users to share compatible information? The "free" nature of OSS quickly collapses into chaos.

OSS advocates counter critics by claiming the method of production does not necessarily impede the marketplace. Companies can still sell software by retaining the rights to release standard versions while independent hackers are given the freedom to improve the software they buy. This would help companies fix "bugs" in software and provide better products to consumers.

The strategy unravels, however, because even companies selling OSS software must allow its free redistribution. Consumers concerned about software compatibility would probably purchase the standard versions. But companies would lose profit as other consumers would freely download improved versions of the software from the Internet. Eventually the companies would suffer from widespread confusion over the wide variety of software versions of each product, including standard versions pirated by profiteers.

OSS advocates also claim software distributors can make money by distributing software free of charge, while providing support services and instructional materials for a fee. This half-hearted accommodation of private ownership suffers the same flaws. It assumes that companies can survive by offering support for nonstandard software that is found in many forms.

Finally, advocates suggest OSS may be used to distribute software that will encourage sales of other products. For example, a manufacturer of computer hardware may give away free programs that make its hardware run better. Or OSS may be given away to engage interest in a company and its proprietary software. Of course, this approach betrays the advocates' goal of eliminating non-proprietary software, and it is probably intended to lure companies. Anyway, the approach works just as well if a company retains the rights to its source code.

Throwing Pebbles

Recent market developments have encouraged OSS advocates to believe their concept will be the undoing of Microsoft and other proprietary software developers. Media reports have portrayed OSS developers as "Davids" prepared to topple the Microsoft "Goliath." But the history of OSS does not offer hope for success.

In some respects, the OSS concept has been around for a long time. Many of the software programs that enable the Internet to function are freely available with their source code. The open-source nature of the Internet is cherished by OSS advocates. But it is also the Internet's Achilles heel which is constantly threatened by proprietary software developments. When companies like Microsoft meet the needs of consumers by providing Internet browsers and e-mail products, they provoke bitter disputes about whether they are developing a proprietary gateway to the open-source Internet. Their critics have turned to the Clinton administration and the courts to stop market advances.

The Free Software Foundation (FSF) has been developing OSS products since 1983 but has had little success in reducing consumer allegiance to proprietary software. The organization is headed by Richard Stallman, a programmer who quit his job at MIT's Artificial Intelligence Lab to pursue an end to "the commercialization of system software." FSF's main activity is its GNU Project, which has developed a complete OSS computer operating system called GNU (a.k.a. GNU's Not Unix). Unix is a proprietary operating system intended to compete against Microsoft Windows; originally OSS, later versions of Unix were made proprietary by Sun Microsystems, Hewlett-Packard and other companies.

GNU has found some success in combination with an OSS operating system called Linux, a favorite of the Open Software Initiative. (The Initiative was launched by Linux distributor Bruce Perens, GNU contributors Ian Murdock and Eric S. Raymond, and others.)

Linux is a good example of how Microsoft's competitors have attempted to exploit the open source concept. It was created in 1991 by Linus Torvalds, a student at the University of Helsinki, who wanted to improve upon Unix and distribute an OSS operating system free of charge. Linux 1.0 and its source code were given away over the Internet in 1994. It comes with a licensing agreement that allows users to alter and redistribute the software, but all distributions must include the source code with improvements.

Linux is building a following among computer users who have sufficient technical knowledge to take advantage of the source code. That, of course, is an important limitation of OSS: it appeals primarily to those who have an interest in tinkering with programs. The Open Source Initiative estimates Linux has "somewhere between 4 and 27 million users."

Despite its limited usage, media interest in identifying a viable competitor to Microsoft has made Linux a temporary phenomenon. Prominent features on Torvalds have appeared in The Economist, Forbes, The San Francisco Chronicle, USA Today and numerous computing magazines.

OSS advocates point to Linux as an example of open source software that can be commercially marketable. Companies like Red Hat Software, Caldera and Debian sell versions of Linux and support services for Linux users. But the long-term success of these companies is uncertain and would seem to depend on Microsoft's decline.

Perhaps sensing an opportunity to hurt Microsoft, its competitors are rushing to accommodate Linux users. Compaq, Corel, Dell, Gateway, Hewlett-Packard, IBM, Informix, Intel, Oracle, Sybase and other software and hardware companies are offering products that work with Linux. In September 1998, Intel and Netscape invested heavily in Red Hat Software, the leading Linux distributor.

Support for Linux may be temporary. If Microsoft survives its antitrust case with the ability to continue to market its Windows operating system intact while holding on to the Windows source code, even Linux supporters acknowledge they cannot compete with Windows. OSS advocates hope the court trial lasts long enough for Linux to gain a market foothold. Linux might also gain ground if Microsoft is severely damaged by the trial, or the court forces Microsoft to release the Windows source code.

Besides Linux, the only other OSS developments that have found much success are the products of Microsoft's competitor Netscape. In January, Netscape announced it would publicly release the source code for its popular Netscape Communicator software, while offering Communicator and Netscape Navigator free of charge. OSS advocates praised Netscape's decision as heralding the end of proprietary software, but it was little more than a desperate attempt at corporate survival. Netscape's Internet browsers have been losing ground to Microsoft's Internet Explorer, and by providing the browsers free of charge, Netscape hopes to increase interest in its proprietary products. It is unlikely that Netscape's new parent company AOL has any interest in giving away additional source code data.

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