PRC forces operating system bundling?
CNet says that
[t]he Chinese government issued a decree two weeks ago that all PCs will need to have a licensed operating system software installed before leaving the factory gates in an effort to crack down on piracy.
The earlier article reports that
Chinese Vice Premier Wu Yi said her government has already issued rules requiring all manufacturers to preload legal operating systems on all computers sold in China--a change from sales of what the software industry decries as "naked" PCs, lacking legitimate operating systems or applications. [...] Wu said only that "legal operating systems must be preloaded on all machines." [...]
Operating system preloads have been terrible for competition. Historically, almost all operating system preloads have been Microsoft Windows. In many cases, getting a naked machine was either impossible or not any cheaper (sometimes more expensive), a fact which has repeatedly inspired antitrust scrutiny. Microsoft has provided incentives that deterred manufacturers from making computers without Windows easily available at prices below those of computers with Windows. That results in users not perceiving a financial incentive to run a non-Windows operating system -- so, unless they have another kind of incentive, they usually don't.
Windows is expensive, but it takes certain ways of selling computers for end-users to notice this and to consider alternatives to Windows. In other markets -- including the markets for the other components of a working computer system -- end-users have some kind of price feedback to help them make decisions. The car market gives people a variety of options, including aftermarket choices for things like sound and navigation systems (and tires, and most kinds of repair services and replacement parts). If a car dealership does its job in the customer's interest, the customer can consider the relative expense of getting various bundled things and the costs and benefits of alternatives. Microsoft has expanded its dominant market share in part because so few users have seen a line item for the cost of using Microsoft operating systems and applications as opposed to others.
I spent a long time recently unsuccessfully trying to get a modern "naked" laptop. I was astounded that companies that are in current antitrust litigation with Microsoft not only "recommend" Microsoft operating systems but refuse to unbundle them from their laptops. But a national legal mandate prohibiting anyone in China (where most laptops are now made) from selling naked systems is an enormous windfall for Microsoft at the expense of competition. It increases the trend of people who don't use Windows having to pay for it.
I can't help thinking that USTR has just made it even harder for me to get a Windows-free laptop in the future. In its letter to Windows Refund Day participants, Microsoft pointed out that "You can purchase a PC with a non-Microsoft operating system or a PC with no operating system preinstalled at all"; we might have been forgiven for thinking that this meant that Microsoft thought that this state of affairs was legitimate. Perhaps the letter should have added "although the latter option may become unavailable due to our concern that software pirates frequently take advantage of it".
The natural inclination of USTR (and maybe some people at Microsoft, and maybe some people in the PRC government) is to say "Well, software copyright infringement is a trend where people who use Windows don't pay for it. And unbundling or naked machines tends to promote that trend." It's odd to think that a remedy for people using Windows without paying for it is to make people who don't use Windows pay for it. More to the point, the "no naked PCs" requirement -- if manufacturers don't see fit, whether because of their contracts with Microsoft or for other reasons, to bundle operating systems with no royalty, and the CNet article suggests that the major manufacturers are unlikely to do so -- means that non-Microsoft OS users are ending up subsidizing copyright infringers. People who don't use Windows will pay royalties under this scheme to Microsoft for the benefit of future Windows development for people who use Windows without paying.
One way of avoiding that subsidy would be to increase direct copyright enforcement in China and encouraging all retails to pass the full cost of using Microsoft software through to all users of such software, while giving them a straightforward means of deciding to use something else. But it continues to be more appealing for copyright holders and USTR to pursue intermediaries and get intermediaries to stop doing things that "facilitate" infringements -- a strategy which brought us the DMCA, and which always means collateral costs and opportunity costs for people who are not engaging in copyright infringement.
Does anybody have more details about this policy and the OEMs' response to it?
