Last month Microsoft Corp. offered a proposal to settle civil antitrust litigation filed in U.S. District Court for the District of Maryland. Since then the proposal has drawn fire from multiple sources, including Apple and Apple’s CEO, Steve Jobs. Last week the company filed a brief and Jobs offered a statement criticizing the plan; today Apple followed up by filing a supplemental brief, a copy of which MacCentral has had a chance to review.
Yesterday Jobs offered a new statement blasting Microsoft’s valuation of its proposed billion dollar settlement, saying that the cost of software involved was worth more like $1 million than the $840 million that Microsoft claimed. Jobs’ comment ties into one of several points touched on in today’s 20 page supplemental brief, which is now with Federal Judge J. Frederick Motz, who is presiding over the case.
Calling the proposal “a massive subsidy for the adoption of Microsoft technology,” Apple said that only five to six percent of the “value” contributed by Microsoft would be eligible to be used to acquire non-Microsoft technology. Apple has contended since last week’s filing that the adoption of the Microsoft proposal in its current form would give the Microsoft an unfair advantage in the educational space, where Apple still maintains a healthy market share.
Software deal heavily weighs in Microsoft’s favor
Apple claimed that Microsoft’s proposal would provide eligible schools with “virtually unlimited amounts of [Microsoft] operating system and application software,” but would exclude products from other vendors. The fact that Microsoft is prepared to offer its Windows-centric TechNet services doesn’t help the company’s case, said Apple.
Refurbished computers exclude new technology, likely Wintel PCs
Apple also objected to Microsoft’s plans to purchase refurbished computers for schools. Apple contended that it’s likely the vast majority of those computers will be Windows-equipped PCs, given that 90 to 95 percent of the desktop computers out there run Windows; businesses that use Windows are more likely to recycle their equipment; and, as Apple puts it, “Macintosh computers have longer lives.”
There’s another problem with refurbished computers, said Apple. Older systems keep the newest technologies out of disadvantaged schools, places they can really benefit. Apple offered wireless networking and high speed networking as examples.
Just because a school isn’t well off doesn’t mean it can’t afford new technology, implied Apple — the company referred to a recent announcement offered by the Maine Department of Education citing Apple as the top bidder in a deal that could put more than 30,000 iBooks and wireless networking throughout seventh and eighth grade classrooms in the state.
Even though Maine isn’t wealthy (37th in the country in per capita income), it’s adopted a forward-thinking technology plan, contended Apple. By comparison, said Apple, adopting refurbished computers will force these underprivileged schools to buy more equipment to get the existing equipment to work.
Proposal will drive demand for more Windows products
Another sticking point concerns what Apple referred to as “a positive network effect.” Microsoft Windows and Windows-compatible computers will drive demand in these schools for additional compatible products, said Apple, and will discourage users to seek alternatives, like Macs. The effect will spill over beyond just eligible schools, too, according to Apple, as other schools in the same districts and regions will seek homogeneity.
Apple’s solution to the myriad problems it cites in Microsoft’s proposal? Simple — to require Microsoft to donate cash, not goods and services.
“The most efficient and effective way to accomplish this goal is by a cash-only donation from Microsoft to a completely independent foundation in an amount equal to the claimed value of the settlement,” said Apple.
If Microsoft isn’t willing to give up the cash, said Apple, then the Court should figure out a way that “all competitors can compete on an equal basis.”
“Fundamental reform of the proposed settlement is necessary to win public confidence and bring the benefits of advanced technology and innovation to America’s poorest schools. Only a settlement structure that protects freedom of choice will serve this purpose.
“For the reasons set forth above and in Apple’s initial objections, the Court should not grant preliminary approval to the proposed settlement. With the record of objections before this Court, Microsoft and the plaintiffs should submit a reformed settlement that protects the competition necessary to meet the needs and preferences of the schools,” concluded Apple.