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Service ... or a scam?

Hot on the Web

This column originally ran in ComputorEdge on June 22, 2001

(Issue 1925, Online Banking and Commerce)

You may have read about Microsoft's new .Net initiative – a plan in which you will no longer purchase software, but will only rent programs. Rather than buying Microsoft Word, for instance, you'll only rent it over the Internet.

It's not really a new idea – in fact, it's simply a new way of thinking about the way computers worked in the 1960s with timesharing. Back then, mainframe computers from IBM, Burroughs and others were so expensive that small and mid-size companies often rented computing time from larger corporations and universities.

But even timesharing tended to be incredibly expensive – especially when buying time from a for-profit outfit.

In fact, the outrageous expense of mainframe computers in the 1960s was one of the driving forces behind those who created the infinitely more affordable personal computers in the '70s.

And with the PC came the notion that you could buy software – and that once bought, it belonged to you.

Not everyone liked this, of course. In the late 1980s and early '90s, Larry Ellison was pushing the idea of distributed computing, selling dumb terminals with high-speed modems (okay, 9,600 bps and 14.4 kbps modems, but those were high speed back then) to compete with the personal computer. Users of these terminals would obviously not have software installed on them, but would use the modem to hook up to servers and/or mainframes with the software you needed to use – spreadsheet, word processor, etc.

Ellison has since made several billion by turning his Oracle database software into an industry standard – several billion more than he ever made selling dumb terminals. Then again, Oracle's licensing agreement is among the most restrictive in the market and is only a degree or two removed from Microsoft's plan to rent software to us.

What's raising suspicions, as well as hackles, is the way the computer industry is trying to sneak this into the marketplace – software will still be found at the local mall, in the same boxes as before, still stored on CD-ROM. And, yes, you'll still pay your cold hard cash before you can walk out the door with that new program or game you've been salivating over.

The difference is that while in the past, once you plunked down your money you owned that title, now you'll simply have a lease on it, or perhaps a contract to use it for a period of time. That CD-ROM you buy may not even have the software installed on it – it may simply have a subscription form.

In six months or a year, you'll have to pay more money to continue using the software you thought you bought.

Don't feel like upgrading? You'll have no choice – fork over another $150, $200, or that software will no longer work.

Sneaky? You bet. Illegal? Probably not.

The software industry has been quietly lobbying state legislatures to pass laws radically shifting the balance of power away from consumers and to publishers. Known as Uniform Computer Information Transactions Acts, these state-by-state laws basically protect software publishers from any lawsuits. Period.

Some might call what the software industry is doing extortion. But extortion is an ugly word ... let's just say that the combination of distributed computing and the UCITA laws present a rather coercive approach to generating repeat business.

As to whether the public will let themselves be trapped by this scam remains to be seen. My guess is that the software industry is betting that even if home users won't play this game, opting to keep their old, perpetually useful software rather than buying into a "lease" on new software, most businesses will probably go along because it's easier.

Already, Microsoft Office XP is shipping – with the new policy of assigning you a "lease" rather than ownership. While the software still resides on your hard drive, you won't own a license for Office XP the way you did with Office 2000.

Further, under these new leasing arrangements, you must register in order to use the software. A few years ago, California state courts ruled that consumers could not be forced to register in order to exercise their various consumer rights, including technical support and/or warranty protection. In the court's view, your receipt was your validation. (Given that the many, probably most – and maybe all – software publishers use the registration process to compile databases of potential customers, those who value privacy were rather pleased with the California decision.)

It ought to be interesting to see how the new registration requirement runs up against California law.

Another reality is that if you purchase a new computer this fall, odds are it will have Windows XP already installed on it – and all indications are that Microsoft will go with the new restrictive leasing arrangement as Office XP has. How many folks will go to the trouble of digging out their old Windows 98 CD and reformatting the hard drive so they can avoid paying for an upgrade in six months or a year?

There are, of course, alternatives to buying into this. Only the largest software companies seem to be adopting the "distributed computing" strategy, at least as an exclusive approach.

For the day-to-day computing most of us do, we only need a few basic pieces of software – word processor, web browser, e-mail program. Visit any shareware archive (,, and you'll find dozens, even hundreds of each of these types of software. Hobbyists and small businesses will always be able to make a modest (but honest) living selling basic word processors, e-mail clients and web browsers – if not spreadsheets, databases, and organizers.

And even Windows XP can't really capture us against our will. If enough people are repelled enough by the leasing arrangement to abandon Windows for a Mac, or a PC with Linux or BeOS, Microsoft will notice and will abandon its strategy of greed above all else.

As always, it's up to us whether we get taken for a ride or not.

(For more information on Microsoft's .NET initiative, visit

For more information on the UCITA strategy, visit