Micro$oft Monitor

Published by NetAction Issue No. 21 January 8, 1998
Repost where appropriate. See copyright information at end of message.


Questions Delay Corporate Takeover of Cal State University Technology
Comments to the California Legislature by Nathan Newman
About Micro$oft Monitor

Questions Delay Corporate Takeover of Cal State University Technology

NetAction Project Director Nathan Newman was one of several witnesses who testified before the California Legislature on January 6, 1998, regarding plans for a corporate takeover of California State University's technology systems by Microsoft, GTE, Fujitsu and Hughes. The hearings were called after NetAction, along with student and faculty activists, criticized the California Education Technology Initiative (CETI), a plan for private management of technology at the 23-campus California State University system through a for-profit corporation. NetAction and other critics of the plan pointed out the dangers of handing Microsoft and its corporate allies a monopoly over technology in the schools that are training the high-tech workforce of the future.

The hearing was sponsored jointly by the Assembly Higher Education Committee, the Assembly Budget Committee on Education, and the Senate Budget Committee on Education. Legislators opened the hearing with a long list of questions about the CETI deal, including what the ultimate cost will be to taxpayers, and what effect a ten-year technology contract with Microsoft and GTE will have on innovation. At the conclusion of the hearing, the legislators reiterated their concerns about CETI and announced plans for more hearings to continue the investigation into whether CETI threatens the public interest.

Under pressure, the California State University administration announced that it would delay signing a contract with the CETI corporate partners until at least March, 1998. This represents a real victory for activists, since the CSU administration's goal had been to sign the contract in December, 1997.

After students, faculty and staff representatives were asked to speak about the CETI initiative, NetAction's Nathan Newman testified about the public interest implications of granting this technology monopoly. What follows is the written draft of Newman's testimony.

Comments to the California Legislature

By , NetAction Project Director
January 6, 1998

Hello, my name is Nathan Newman and I am speaking here as Program Director for NetAction, a public interest advocacy group committed to democratic use of technology and open computing standards. We strongly oppose the CETI proposal and hope the state legislature will block its implementation.

While our organization has strong concerns about the technological and anti-trust implications of the CETI consortium, I would like to start my presentation with our worries about its financial implications, since the supposed "savings" of this plan are the main reason given for its adoption.

CETI is being sold as a "free lunch" where the California State University will get upwards of $300 million in technology upgrades with, according to the CSU administration, no cost or loss of control by students, staff or faculty. Now, any time one hears about a free lunch, you should generally suspect that you are being taken for a ride. But you don't have to have a suspicious mind in the case of CETI; the CETI partners themselves have made clear that they expect to make not only a healthy profit but to gain strategic advantages for each of their corporations. Up front, the consortium expects to be making a profit within four years. This is on top of the profits each individual company will get from being the nearly exclusive technology supplier to both the consortium and to students, faculty and staff. For a modest up front investment in technology, most of whose ownership will be retained by the consortia in any case, the CETI partners are being given a monopoly worth billions of dollars.

Worse, these profits will be paid for by limiting the technological choices of students and faculty. In section 9.5.2 of their August proposal, the CETI partners made it clear that their cost savings are based on promoting a narrow set of technologies supplied by GTE, Microsoft, Hughes and Fujitsu. In their words, "Support for non-mainstream products which are anticipated to be low in volume will not allow the cost savings forecasted for the mainstream products like the standard PC." Other cost savings and, coincidentally more profits for the partners, will come from giving tech support only for chosen software technology such as Microsoft Windows and Microsoft's Office applications, which the partners note will lead to "minimizing the training required to bring everyone to a minimum proficiency level."

An explicit provision of the CETI proposal is that "the CSU system will work with CETI to allow for the use of incentives to faculty and staff in the development of revenue generating projects." What this means is that the CSU system will allow the consortia partners to create economic and technical biases in favor of technology that generates revenue for the consortia - violating what should be academic support for neutral and open computing standards. This will chill technology innovation in favor of the lowest common technology denominator.

The proposal is also a danger to equal access to technology among students. The CETI proposal gives these corporations control of technology decisions about marketing a range of services to students, such as technical support and off-campus Internet access, that had previously been considered part of tuition at the University. We can expect economic stratification between haves and have-nots within the University as some students can afford these "enhanced" services and others are left out.

The CETI proposal is a thinly disguised tuition increase for students whose "self funding" will be largely based on shifting costs onto students through a menu of fee-based services.

Unbelievably, in a world of fast-moving technology, the California State University system is giving a ten-year contract to one set of vendors. This just highlights the problem with privatizing control of the CSU's technology system to a for-profit entity. While there are no doubt economies and cost savings to be made through the concentrated purchasing power of the CSU campuses, it is nearly insanity to commit to one set of vendors over such a long period of time given the rapid technological change we have seen. A much better approach would be competitive bidding every few years among a range of contractors, many of whom don't even exist today but will deliver the best products tommorrow - a possibility foreclosed by the ten-year monopoly of the CETI deal.

So why is the CSU administration agreeing to such a bad deal for California taxpayers and students? Well, in their public announcements, a number of administrators have blamed you - the state legislature. And I have to agree with them. By refusing to provide them with the funds to make the necessary initial investments, the state legislature has left the CSU administration to scramble for a few hundred million dollars in short-term technology funds in exchange for granting a long-term high-cost monopoly. GTE, Microsoft et al are just taking advantage of this budgetary straightjacket imposed on the CSUs by the state legislature, a straightjacket that will no doubt cost taxpayers and students hundreds of millions, probably billions of dollars over the long-term.

It is short-sighted economically and a tragic loss technologically. It is this technological loss and its public policy implications beyond the campus community that I will address now.

NetAction has long promoted a vision of open computing standards, and the CETI proposal is one the gravest threats to such open standards in many years. California State University campuses are some of the premiere training centers for the high-tech workforce of the future and this proposal promises to turn them into the private training program for Microsoft.

The CSU administration and the CETI partners claim that students and faculty will be free to use other technologies but they also state that tech support will not be provided within the CETI funding framework. More importantly, by controlling the key central servers that regulate information flows on campus, students and faculty will be all but forced to adopt Microsoft products in order to use campus resources.

To give just a simple example of how this will work - and how Microsoft has functioned with other corporate partners - the on-line Web-based help systems for students detailed in the CETI proposal will no doubt be designed to work best or possibly only with Internet Explorer web browsers. Financial aid software provided by CETI will no doubt be optimized for Microsoft Excel spreadsheets and other software will all reinforce one set of proprietary software to the profit of Microsoft and the CETI partners. Many analysts have noted the "network effects" of the new information technology where control of one aspect of computing standards allows companies to control a range of other technological choices connected to those initial standards.

And with the largest university system in the world adopting Microsoft-only standards, that will in turn give great incentive for other users in California and around the country to adopt similar standards, thereby reinforcing Microsoft's expanding monopoly position. In a time when Microsoft is being investigated by both the federal government and the state of California for anti-trust violations, it is unbelievable that the CSU administration is even conceiving of handing it such a strategic prize.

This proposal for Microsoft and its allies to administer technology implementation at the CSU system, including developing classroom curriculum and training programs for students and staff, comes in the context of the ongoing privatization of technical education in the country.

Already, Microsoft-approved curriculum taught by Microsoft-approved instructors and audited by the Microsoft Corporation is taught at over 300 college campuses across the country, including over 30 campuses in California. These Microsoft "Authorized Academic Training Program" participants are pulled into the Microsoft orbit through offers of free software and training for technical programs left underfunded by state governments and therefore vulnerable to Microsoft's corporate bribery.

Looked at comprehensively, Microsoft is using its involvement in technical education and infrastructure to further reinforce its control of computing. It is an unfortunate fact that our country's whole system of technical education is being distorted as it becomes one more tool for Microsoft's monopolistic goals.

I would also note that GTE's involvement is equally problematic. In a time when the state government is supposed to be promoting a level playing field for competition in telecommunications, the CETI proposal will essentially subsidize GTE's creation of a high-speed backbone for phone and Internet access around the state.

This is not then just a profitable one-time profit gain for the companies involved but a great strategic advantage against competitors. Those are not my words but the words of the CETI proposal. In section 7.3 of the August proposal, the CETI partners admit that their interest in the project is as follows: "As individual companies each of the partners also has significant opportunities to gain advantage in its respective markets." And it notes specifically, "GTE has an opportunity to capture a larger segment of the California local and long distance telephone business." To approve this proposal without thorough review by the California Public Utilities Commission for its competitive implications would be irresponsible on the part of the state government.

Overall, NetAction recommends the following as principles for any public-private agreement around technology at the California State University system:

  1. There should be no corporate management of educational institutions by companies with a direct financial interest in the products purchased by the campuses or students.

  2. Any outside management support should be committed to training students in a diversity of technologies and be committed to supporting open computer standards across the board.

  3. Any proposal must include an explicit commitment to full and equal access to technology on campus regardless of economic ability to pay.

  4. Educational curriculum should be designed by educators dedicated to the long-term interests of their students, not corporations looking to lock in "customers" to proprietary software.

  5. No proposal should be approved without a thorough analysis of its possible impact on technology standards and monopolies outside the university.

About The Micro$oft Monitor

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