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Microsoft.Net--a new monopoly?

Watching the development of the .Net initiative, Gary Hein of The Burton Group says Microsoft plans to use its desktop monopoly to create an irreplaceable Internet position.

    Microsoft.Net can be summarized in one simple statement: Microsoft is building an Internet monopoly.

    Does the very nature of the Internet prevent one company from monopolizing the Internet? In a perfect world, market forces and open standards would prevail. But this isn't a perfect world.

    Never underestimate Microsoft. It is poised for success given its broad market penetration, current business practices and deep pockets. But Microsoft's trump card is the desktop monopoly that governs how over 96 percent of people access the Internet. Tie the desktop monopoly to Microsoft-held Internet properties and watch Internet.Net grow.

    But success is not guaranteed. As abolitionist Wendell Phillips once said, "The price of liberty is eternal vigilance." Are we willing to cede control of the Internet for the sake of convenience and usability?

    Microsoft will experience an enormous negative-feedback loop, in which every success will create new obstacles. Governments and competitors are fiercely battling .Net even before the first .Net components ship. Privacy and security issues alone can derail the entire initiative at the starting gate.

    Step One: Control the services
    A Web service is a collection of functions packaged as a single entity, published to the network for other applications to use. Technology built upon interoperability specifications like XML, SOAP, WSDL and UDDI forms building blocks for creating distributed systems. The technology can even aggregate other Web services and orchestrate the flow of information and process within and across corporate boundaries. Use and interaction are independent of underlying development languages, tools, hardware and operating systems.

    It seems that everyone has a Web services plan these days--Sun Microsystems, IBM, Hewlett-Packard, BEA Systems, Bowstreet and others. These companies are creating tools for building and delivering Web services. Microsoft is a late entrant into this market but soon will provide a developer tool, Visual Studio.Net, and run-time environment, Windows.Net Server (the successor to Windows 2000 Server). Add the millions of Visual Basic developers, and Microsoft will be a formidable opponent.

    But winning the game requires more than an application platform or a development toolset. Microsoft is building a complete solution with .Net, one that transcends Web services to deliver an Internet experience, from desktop and desktop services right through to content providers, Internet services and, ultimately, payment.

    Step Two: Leverage the monopoly
    Microsoft Passport is an Internet authentication service that provides single sign-on to Passport-enabled Web sites and services. Microsoft HailStorm (not yet released) will be a consumer-oriented, subscription-based Internet identity and set of identity-related services. HailStorm requires Passport as its authentication method. People store their personal information within HailStorm and grant others rights to view or interact with their personal HailStorm-held information.

    It's arguable that anyone can provide an Internet authentication or identity service that competes with Passport and HailStorm. This is not a question of technology, just a matter of creating critical mass among users, developers and content providers. Given the magnitude of this challenge, very few organizations are capable of delivering a solution.

    But here's the kicker: Microsoft has integrated several Passport-enabled services directly into the Windows XP desktop. Windows XP users must use Passport to gain full access to Windows XP desktop services. This builds the Passport (and eventually HailStorm) subscriber base and creates a compelling justification for developers and content providers to adopt Passport and HailStorm within their offerings. Furthermore, it's unlikely that any current or future integrated desktop feature (like messaging or media players) will support anything but Passport and HailStorm. In other words, Microsoft will use its desktop monopoly to create an irreplaceable Internet position.

    The Achilles' heel
    Microsoft's size and strength are not enough to guarantee success. Windows is strong in the enterprise but has yet to gain significant mind share within the Internet. Microsoft is also creating ill will among developers by abandoning Java (and millions of Java developers) and artificially limiting Visual Studio.Net to Windows.

    For .Net to succeed beyond Web services, Passport and HailStorm must gain traction among consumers, developers and content providers. Security is absolutely critical to the success of Passport and HailStorm, yet Microsoft's Internet security track record is dismal. In fact, it's getting worse: Just look at the recent Code Red and SirCam worms and published Passport vulnerabilities.

    Consumers are hesitant to trust anyone with their personal and private information. Industries that handle private consumer data, such as banking, health care and insurance, are subject to privacy, security and auditing regulations. Self-regulation in these industries has been deemed insufficient by governing agencies, yet Passport and HailStorm are wholly owned and managed by Microsoft. It is unlikely that Passport and HailStorm can escape regulation, but we can't depend upon governments alone to protect consumers' interests.

    It's unquestionable that .Net integration will simplify the Internet experience for millions of users. But at what cost? As a society, are we willing to cede control of the Internet to Microsoft for the sake of usability and convenience? Success is far from guaranteed, but Microsoft will do everything in its power to win. Our eternal vigilance is the only barrier between Microsoft and its next monopoly.