A Compelling Piracy Response

This week, a curiously synergistic set of RSS feeds dropped into my Outlook inbox. On Tuesday, BetaNews reported that according to analyst firm IDC, one in three software installations in 2005 was pirated, an increase of five percent versus 2004 that cost the software industry $34 billion. That evening, I received a related digg post indicating that, although the United States had the lowest piracy rate (21%) in the world last year, that percentage amounted to $6.9 billion in losses to software manufacturers (the highest of any country, because the U.S. software market is so large).

Earlier today, Slashdot reported that first functional samples of MIT's $100 laptop, intended for third-world countries and other low-income populations, were being shown off at the Seven Countries Task Force Meeting. And all of this news came on the heels of Microsoft's Monday announcement of its pay-as-you-go PC ownership program called FlexGo, an alternative approach to reaching these same potential computer users (and an interesting implementation of the TPM capabilities that are now being built into PCs, to boot….pun intended). Of course, FlexGo also addresses the piracy issue, by providing a low-entry-cost, legal means of obtaining hardware and software.

Will Poole introduced FlexGo by quoting the following statistics, "if you look in the developed markets, you see between 50 and 85 percent PC household penetration. If you look in the emerging markets, and you see only about 6 percent. And yet, at the same time, among consumers, or people in the emerging markets, you see a huge penetration of cell phones, 27 percent according to Merrill Lynch….And the other thing you find out is those cell phones are powered by the business model called prepaid, or pay-as-you-go. And, if you look worldwide, you find out that about 70 percent of mobile phones in the emerging markets use a prepaid card."

Microsoft's approach, as it's been beta-tested for the past year in Brazil, is tailored for individuals and families with inconsistent incomes and works as follows:
1) A customer buys a PC, one that would normally sell for $600, for $250 to $300.
2) As his or her (and his or her family's) needs require and income allows, he or she purchases usage cards, available in various number-of-hour options
3) After he or she pays off the remaining balance of the PC's value on an hour-by-hour basis, the PC becomes fully 'unlocked' for subsequent 'normal' time-unlimited use

FlexGo, fundamentally being a subscription service, supports a number of alternative payment-and-usage scenarios, such as:
a) Zero-money-down' ownership, after additional hourly payments as compared to the program described earlier,
b) Lease, with the option to buy-and-own at the end of the lease period, and
c) Rental plans, with no option for ownership (analogous to Yahoo Music Unlimited, URGE, Rhapsody, Napster To Go, or another Microsoft DRM-based subscription music program).

I've admittedly been pretty hard on Microsoft this week. But I think FlexGo shows a lot of promise, both absolutely and relative to MIT's efforts. Admittedly, I haven't personally seen an OLPC (One Laptop per Child). But based on what I've read about it, I tend to agree with the comments of folks such as Bill Gates and Paul Otellini; signficant (and perhaps excessive) functional shortcuts had to be made to hit the $100 bill-of-materials cost point (Linux fans, let me be abundantly clear here, I'm not dissing your operating system, which is perfectly adequate in an application such as this….I'm talking about hardware shortcuts). A rent-to-own or hardware-subsidized-by-subscription alternative approach has been proven successful in applications such as cell phones and set-top boxes, and there's no fundamental reason why it wouldn't work in PCs, too.

Technology, when appropriately applied, can be a powerful vehicle for empowerment and education, and for bridging the economic and other gaps between 'haves' and 'have nots'. As my bio on EDN's website (which I wrote when I joined the magazine nearly 9.5 years ago) notes, "Innovations based on technical, economic, and moral concerns will ensure a higher quality of life for all humans and improve our environment. Engineering, a unique blend of the scientist's theoretical creativity and the tangible reality of the marketplace, is the place where these breakthroughs will occur." FlexGo and the OLPC are in sync with this aspiration, and both receive my strong endorsement.