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Neelie Kroes: "Choosing open standards is a very smart business decision"
Tuesday, June 10 2008 @ 10:31 AM EDT

Neelie Kroes just gave a speech at OpenForum Europe today on standards, "Being open about standards". I put it in News Picks, but I wanted to be sure you didn't miss it, so I am putting it here also. In the OOXML context, the most important sentence, I'd say, is this one:
If voting in the standard-setting context is influenced less by the technical merits of the technology but rather by side agreements, inducements, package deals, reciprocal agreements, or commercial pressure ... then these risk falling foul of the competition rules.

Here's the second most important thing she said in the OOXML context:

Standards bodies do important work in difficult circumstances. But like all of us their rules need to keep pace with the changing commercial environment. If they need help in tightening up their rules to avoid being manipulated by narrow commercial interests, or to design the right ex ante rules, then they have my support. My door is always open.

Well, in the case of ISO, just formulating some required rules would be nice. You know, rules that can't change in the middle of the game. In my schoolyard, we called that cheating. I have a suggestion. How about a rule that a vendor proposing a standard can't stack committees trying to decide whether or not to approve it? No? Too simple?

She also said that choosing open standards is "a very smart business decision." Overall, it's a very encouraging speech. I see one area of concern. I don't think, for example, that she yet sees the significance of software patents and their anticompetitive effect on FOSS. I hope she will read Red Hat's amicus brief in In Re Bilski for a perspective on that. We have it as PDF and as plain text here. It explains very clearly how software patents clash with the Open Source development model, something I hope she will consider.

That reminds me, if you recall the Bilski oral arguments on May 8 were recorded, but the recording we had back then cut off in the middle. I wrote to the court about it, and I just heard back that you can now successfully listen to the entire recording, now split in two parts, by going here and searching by keyword Bilski.

But getting back to the Kroes speech, the bottom line, to me, is that she says governments should not force citizens to use a proprietary product if there is an open alternative:

As purchasers, we need to be smart when we buy technology. We need to be aware of the long term costs of lock-in: you are often locked-in to subsequent generations of that technology. There can also be spill-over effects where you get locked in to other products and services provided by that vendor.

That is just bad purchasing.

The Commission must do its part. It must not rely on one vendor, it must not accept closed standards, and it must refuse to become locked into a particular technology -- jeopardizing maintenance of full control over the information in its possession.

This view is born from a hard headed understanding of how markets work -- it is not a call for revolution, but for an intelligent and achievable evolution.

But there is more to this than ensuring our commercial decisions are taken in full knowledge of their long term effects. There is a democratic issue as well.

When open alternatives are available, no citizen or company should be forced or encouraged to use a particular company's technology to access government information.

No citizen or company should be forced or encouraged to choose a closed technology over an open one, through a government having made that choice first.

These democratic principles are important. And an argument is particularly compelling when it is supported both by democratic principles and by sound economics.

I know a smart business decision when I see one - choosing open standards is a very smart business decision indeed.

I see some elements in the speech that worry me, including a section that mirrors what Microsoft was pushing to the French in the OOXML saga, namely that proprietary de facto standards can be fine too, but the concluding section at least gives hope:

Standards are the foundation of interoperability.

Standards may, of course, be proprietary or non-proprietary. Much excellent technical development has been driven by non-proprietary standards -- the internet is awash with acronyms for non-proprietary standards: HTTP, HTML and XML.

Many standards bodies express a preference for non-proprietary standards. Non-proprietary standards avoid the need for licence agreements and royalties. They avoid the need to ask permission if you want to use or develop the technology -- follow-on innovation may be easier. They avoid subjecting the future development of the standard and the technology to the commercial interests of the technology's originator.

Of course, proprietary technology development is vital to reward R&D investment and innovation that would otherwise not be made. The patent system is a tremendously effective mechanism to create incentives to innovate, and reward successful innovation.

Proprietary technology is at the heart of Europe's success in second and third generation mobile technologies, for example. Intellectual property protection for technology will always be necessary to give just rewards for investment in R&D. There will always be an important place for proprietary technology and formal proprietary standards.

Standards may also emerge, de facto, from markets: a particular operating system for example, or a particular document format.

Standards emerging from the market can be a good thing if they emerge as a response to consumers' expressed preferences. But they may also be problematic, having none of the safeguards of disclosure that standards bodies typically require.

Why is she lauding software patents when Europe doesn't for the most part recognize them? And in software, there is no "emerge from markets" because Microsoft owns the market, and not necessarily because it's the best choice or even *a* choice. Just try to buy a computer without Windows.

This is essentially one of the argument that Microsoft made to France, when it looked like the standards body there was going to choose ODF exclusively when it was an ISO standard and OOXML wasn't yet "approved". It's been reported that Microsoft not only got a delay on the ODF decision until after OOXML was also "approved" in the ISO process, it used the argument that de facto proprietary standards should not be excluded. Let the public decide what they want. Go with what most people use. Interoperability shouldn't be required as an end in itself. Those were the arguments at the time, prior to ISO "approval" of OOXML. It worries me to see similar language in her speech. Now, after the "approval" of OOXML (although it's now stalled by appeals and hence not yet officially approved), Microsoft will argue that OOXML, if it ever is finalized, is "open" and documented and "rights free", so where's the beef?

Well, for starters, I don't agree that OOXML is rights free. Commercial GPL vendors don't get any patent promise. The Software Freedom Law Center has published an analysis that concluded that Microsoft's OSP provides no assurance to FOSS developers and, significantly, that it is incompatible with the GPL. Linux is Microsoft's principal competition, so it's an exclusion that ought to matter to any regulatory body concerned with encouraging competition, I would think. Nor do I view an "open" standard as open, if it allows proprietary extensions, as OOXML does.

And here's one last part that I noted:

Finally, if standards develop through customer preferences, most of the time, we should do nothing.

That stance may surprise you. But it is often wise to resist the impulse to regulate. If the proprietary technology initially appears to harm consumers more than it helps them, often the market will find a way out of the problem.

After so many years of Microsoft dominance, I doubt that will work out in our lifetime. Happily, she recognizes the principle:

When a market develops in such a way that a particular proprietary technology becomes a de facto standard, then the owner of that technology may have such power over the market that it can lock-in its customers and exclude its competitors.

Where a technology owner exploits that power, then a competition authority or a regulator may need to intervene. It is far from an ideal situation, but that it is less than ideal does not absolve a competition authority of its obligations to protect the competitive process and consumers.

In essence the competition authority has to recreate the conditions of competition that would have emerged from a properly carried out standardisation process.

There seem to me to be two possibilities and, depending on the case, either or both may be necessary.

First, the de facto standard could be subject to the same requirements as more formal standards:

  • ensuring the disclosure of necessary information allowing interoperability with the standard;
  • ensuring that other market participants get some assurance that the information is complete and accurate, and providing them with some means of redress if it is not;
  • ensuring that the rates charged for such information are fair, and are based on the inherent value of the interoperability information (rather than the information's value as a gatekeeper).

In addition, where equivalent open standards exist, we could also consider requiring the dominant company to support those too.

Better, much better, than trying to sort out these problems, is preventing them from arising. And we all have a responsibility to ensure that this type of perpetual lock-in does not happen, and, where it does happen, we have a responsibility to minimise the damage.

Overall, a very encouraging speech, don't you think?


  


Neelie Kroes: "Choosing open standards is a very smart business decision" | 133 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Corrections Here
Authored by: feldegast on Tuesday, June 10 2008 @ 10:35 AM EDT
So they can be fixed

---
IANAL
My posts are ©2004-2008 and released under the Creative Commons License
Attribution-Noncommercial 2.0
P.J. has permission for commercial use.

[ Reply to This | # ]

OT, the Off topic thread
Authored by: Erwan on Tuesday, June 10 2008 @ 11:01 AM EDT
As usual.

---
Erwan

[ Reply to This | # ]

News Picks Discussions here.
Authored by: Erwan on Tuesday, June 10 2008 @ 11:03 AM EDT
Please, don't forget to quote the article's title.

---
Erwan

[ Reply to This | # ]

Neelie Kroes: "Choosing open standards is a very smart business decision"
Authored by: tknarr on Tuesday, June 10 2008 @ 11:05 AM EDT

Her argument's not even a new one. Four words: "single source of supply". Ask any businessman whether it's smart to have something that's utterly crucial, that you can't continue in business if you don't have it or it's significantly changed, and is available from one and only one source. Every one of them will tell you that that's a bad idea. And it's a bad idea for software just as it is for anything else. You never want to be in a position where, when one of your vendors decides to take a path that's not favorable to your own business interests, you have no choice but to go along with them. You always want to be able to do what's best for your business, no matter what your vendors choose to do.

[ Reply to This | # ]

Government also needs to ban lock-in in the case of government granted monopolies.
Authored by: Anonymous on Tuesday, June 10 2008 @ 11:29 AM EDT
An example if this is ITV's use of Microsoft's Silverlight exclusively for it's
broadcast content viewable on the Internet.

The government has given ITV a market monopoly to use certain broadcast bands.
ITV is leveraging that monopoly to sell rights to view that broadcast content on
the Internet exclusively to Microsoft's monopoly lock-in Silverlight system to
the exclusion of all others. When government grants any such monopoly to the
likes of ITV, they should ensure that the monopoly can't be used to leverage a
monopoly in other fields.

ITV's broacast license should be subject to the condition that if ITV makes a
deal with a vendor like Microsoft for the freely broadcast content, then it
should make the freely broadcast content available to others on the same terms -
eg. Youtube and others should be allowed to broadcast the free broadcast content
on the Internet as well.

[ Reply to This | # ]

Neelie Kroes: "Choosing open standards is a very smart business decision"
Authored by: Anonymous on Tuesday, June 10 2008 @ 11:46 AM EDT
PJ, when you ask about her supporting software patents, or commenting therein,
she said "Technology." Technology is not all software, some of it is
hardware.

There are hardware standards just like there are software standards. Without
those, one vendor's NIC and another's wouldn't interoperate on the same media
layer, for instance.

Just my opinion here, but I think you're perhaps viewing her comments in too
narrow of a scope.

Regards ...D

[ Reply to This | # ]

reward R&D investment and innovation that would otherwise not be made.
Authored by: Anonymous on Tuesday, June 10 2008 @ 12:13 PM EDT
But who says that innovation would not be made?

When I solve a problem for my employer, that innovation is paid for by the
ability to do new things.

Take, for example, video compression. Without this, the recording industry would
be in dire straits because tape production would have had to continue and the
size of the analogue laserdisk made it a non-starter.

Video compression enabled all members in the supply chain to reduce costs
DRAMATICALLY.

So if some bright spark hadn't patented it, the work would STILL have been paid
for by the entertainment industry.

Even if DVD hadn't been made, digital compression is all that makes CGI movies
feasable. If it hadn't been compressible, there would have been little chance of
getting enough storage for the movies, not bandwidth to either record or send on
to a team in a different location.

Camcorders needed compression to make the storage smaller and cameras would not
be digital without jpeg compression.

The ability to do this would have seen the companies paying for it. One could
not do it alone, they would have either been a small segment and impossible to
make mainstream or pay too much and if they try to make a clique, we have the
HD-DVD/BluRay row all over again (you know how they could have won that? release
all patents. Although they'd get zero licensing if the lost, they would have
LOST licensing revenue to a competitor).

Patent's don't reward innovation unless they are only for extraordinary new
things. Maybe not even then.

[ Reply to This | # ]

Eyeballs for ODF - the Groklaw discussion thread
Authored by: bbaston on Tuesday, June 10 2008 @ 12:20 PM EDT
Eyeballs for ODF posts here

For Groklaw's benefit - whether participating over at OASIS or just passing by - here's the place to post.

PJ reminds those of us monitoring the discussion to
"Stay polite at all times, of course, if you say anything, and you needn't say anything, but do follow along and please keep us posted on anything you see that sounds peculiar."


OASIS discussion list for ODF Implementation, Interoperability and Conformance

If you want to monitor the "real, live" OASIS discussion by dispatches directly to your emailbox, send an email to
oiic-formation-discuss-subscribe at lists.oasis-open.org [replacing " at " with "@"]
and OASIS should then send a confirm-by-reply for your enrollment.

Some relevent OASIS announcements include the ones here and her e.

---
IMBW, IANAL2, IMHO, IAVO
imaybewrong, iamnotalawyertoo, inmyhumbleopinion, iamveryold

[ Reply to This | # ]

Rewards for Investment in R&D
Authored by: Anonymous on Tuesday, June 10 2008 @ 12:35 PM EDT

I think I just spotted the main underlying cause of the whole patent problem:

    Intellectual property protection for technology will always be necessary to give just rewards for investment in R&D.
Taken to the extreme, one could interpret the above statement/belief as:
    R&D should always be rewarded.
As a patent is a "Government sanctioned Monopoly" and considering the harm monopolies cause to a competitive market, patents should only be granted for inventions that pass a particular thresh-hold of inventiveness. In other words, not everything that can be defined as an invention should be patentable.

However, since that line is even more difficult to define then the current line the Supremes are arguing with, I suggest the following solution:

    Since a patent is a "Government sanctioned Monopoly", the licensing fee for creating said patent should be regulated by the Government
That can be achieved by:

Create a requirement that anyone that wishes their invention to be patented must provide all costs associated with "inventing the device" to the USPTO. On request, said entity must provide their accounting books to an Audit to confirm the costs. The entity must also provide an indication whether or not they will be making the "new invention".

The USPTO passes those costs off to a body along with a list of inventions - both "out of market" and "within the market" - that come close to the identified invention. A rating needs to be provided by the USPTO on the similarity of the invention to the others that is indicative of:

  1. How unique the invention is.
  2. What the unique aspect of the invention is.
A "reasonable license fee" is then decided by that panel based on:
    What the truly unique aspect of the invention is within the whole device.
    The relation of the "R&D costs" with the unique aspect of that invention "in the whole".
    The general knowledge of someone experienced in the appropriate field.
    The start up costs that would be associated with creating the new invention.
    The current market value of the inventive devices that most closely resemble the new invention.
    Whether or not the entity applying for the invention is going to make the invention.
Armed with that information, one could produce a reasonable license fee to apply to any given inventive device.

The reason I suggest the above is due to the following:

    A: Not all R&D money spent is "money worth spending". As a result, for example, R&D that ends up "re-inventing the wheel" should not be "rewarded".
    B: Not all inventions have the same value to society. Some inventions are worth a lot more then others. Those valued less should not receive the same "reward" as those valued more.
    C: Not all inventions are "difficult and time-consuming" to build. Some require very little cost to "invent" and/or build. It makes sense that if it required very little cost to "invent" and it is very easy to "produce" licensing costs should be proportionally minimal.
    D: If the entity filing for the patent has no intention of producing the patent, then said entity should not be "rewarded" for spending monies they have no intention of spending. The licensing costs should be dropped according to the new formula (complete formula of costs minus the startup costs of building the "new invention").
Of course the above doesn't take care of the "other problems" with how the USPTO grants patents such as granting a patent for a non-specified "invention". Or possibly granting patents for "inventions" that science can't even produce yet (not sure this has happened but I do recall someone attempting to patent the warp engine).

RAS

[ Reply to This | # ]

MS Complaining - Extremely Ironic
Authored by: Anonymous on Tuesday, June 10 2008 @ 12:57 PM EDT

    And in software, there is no "emerge from markets" because Microsoft owns the market, and not necessarily because it's the best choice or even *a* choice. Just try to buy a computer without Windows.
The fact it is so difficult to buy a non-Mac pc without MS Windows makes it extremely ironic when MS complains about anti-MS-competitive "effects".

RAS

[ Reply to This | # ]

"I know a smart business decision when I see one"
Authored by: DaveJakeman on Tuesday, June 10 2008 @ 03:34 PM EDT

I know a smart lady when I see one.

---
Monopolistic Ignominious Corporation Requiring Office $tandard Only For Themselves

[ Reply to This | # ]

ISO puts standard for Microsoft's OOXML document formats on hold
Authored by: Mark_Edwards on Tuesday, June 10 2008 @ 06:33 PM EDT
Here is the Heise Report and here is the official ISO Statement

[ Reply to This | # ]

Gatekeeper insight
Authored by: SilverWave on Tuesday, June 10 2008 @ 06:47 PM EDT
* ensuring that the rates charged for such information are fair, and are based
on the inherent value of the interoperability information (rather than the
information's value as a gatekeeper).

Yes this is key and a huge blow to ms.

---
The universe tends toward maximum irony. Don’t push it. —JWZ

[ Reply to This | # ]

HOWTO end the lock-in
Authored by: grouch on Tuesday, June 10 2008 @ 10:23 PM EDT
Microsoft's anticompetitive power to lock-in "consumers" and their data stems from 3 locks:
  1. Near-universal preinstallation of MS software on new computers.
  2. Secretive and continually changing file formats.
  3. Secretive and continually changing protocols.

No government or competition agency of government has forced open these 3 locks to restore a truly competitive market. In fact, no government or competition agency of government has been effective in prying open even 1 of these 3 locks. If any one lock were forced open, the other 2 might be opened by the resulting competitive pressures.

The U.S. antitrust case against Microsoft did not address any of the locks. It addressed only the very narrow "middleware" barrier to competition. As a result, the U.S. settlement has had little if any effect on the market.

The EC case may prove effective, someday, in prying open the secretive protocols lock. This may take so long that the rapid advance of GNU/Linux systems and the rapid advance of Microsoft's abuse of its customers may render the European Court of First Instance's ruling moot.

There have been recent moves by a few computer retailers to defy Microsoft's insistence on having MS software preinstalled on every PC sold. It is too soon to tell whether these efforts will be as half-hearted and duplicitous as Dell's largely failed efforts. Until OEM's can be truly insulated from retaliation by Microsoft, the preinstallation lock will be effective at suppressing a competitive market.

File format lock-in can most easily be broken by the use of ODF. It can be most easily maintained by the uninformed or corrupted contractual activities of governments -- governments which use their financial power to mandate the use of MS Office, internally or by inducement to those who deal with government agencies, will strengthen Microsoft's ability to quash competition. Many governments, particularly the U.S. government, have chosen to assist in the elimination of competition in the area of software.

Choose to break one of the locks on competition.

---
-- grouch

[ Reply to This | # ]

Unfortunate mainstream misreporting
Authored by: macrorodent on Wednesday, June 11 2008 @ 12:29 AM EDT
Reporters still have hard time making the distinction between open source and open standards, as can be seen in the Associated Press -originated clip here: http://physorg.com/news132324510.h tml, with headline

EU pushes open-source standard as 'smart business'

I think it is important to emphasize that implementing ODF does not mean that applications must necessarily be open source. Too many decisionmakers are still wary of FOSS, so this misperception can create an opening for FUD against the open standard.

[ Reply to This | # ]

Were Neelie's thoughts expressed to Microsoft a few weeks ago?
Authored by: Brian S. on Wednesday, June 11 2008 @ 12:14 PM EDT
In essence the competition authority has to recreate the conditions of competition that would have emerged from a properly carried out standardisation process.

There seem to me to be two possibilities and, depending on the case, either or both may be necessary.



First, the de facto standard could be subject to the same requirements as more formal standards:

* ensuring the disclosure of necessary information allowing interoperability with the standard;
* ensuring that other market participants get some assurance that the information is complete and accurate, and providing them with some means of redress if it is not;
* ensuring that the rates charged for such information are fair, and are based on the inherent value of the interoperability information (rather than the information's value as a gatekeeper).

The standards for OOXML currently fall short of the requirements of this statement and a delay in publication and implementation has been accepted by Microsoft, ECMA and ISO.



In addition, where equivalent open standards exist, we could also consider requiring the dominant company to support those too.
Microsoft have surprisingly announced they are going to support ODF v1.1.

Brian S.

[ Reply to This | # ]

Neelie Kroes: "Choosing open standards is a very smart business decision"
Authored by: Anonymous on Thursday, June 12 2008 @ 05:04 PM EDT
"Just try to buy a computer without Windows."

That's easy. Just go to a Mac store. You'll find plenty.

[ Reply to This | # ]

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