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Microsoft's Proposal

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Digital Equity

MICROSOFT TO AMEND SCHOOLS SETTLEMENT PLAN 12/10/01
Issue: EdTech/ Digital Divide
Last month, attorneys for Microsoft and plaintiffs cut a deal agreeing to set up a private foundation to aid needy schools and donate an estimated $1 billion in money, software, services and training over five years. Now, lawyers for both sides plan to announce changes intended to respond to some of the most sharply criticized aspects of the deal: How much choice is afforded the schools and how funds are to be used for training. Under the refined terms, U.S. District Judge J. Frederick Motz would determine who would be the members of the foundation's five-member board based on nominations made by plaintiff attorneys, Microsoft and five educational
associations. Another change would give the foundation complete control over the training component of the settlement, rather than Microsoft. But training, at $90 million, is paltry, critics charge. "Usually, you can figure spending about $3 in training for every dollar on software," said Gartner analyst Michael Silver. Using that guideline, training should be at least $1.5 billion, given the $500 million worth of software Microsoft plans to donate. The donations would go to public elementary and secondary schools at which 70 percent of students are eligible for federal meal assistance, or approximately 14 percent of the nation's schools, according to Microsoft. [SOURCE: CNet, AUTHOR: Joe Wilcox]
(http://news.cnet.com/News/0-1003-200-8122504.html?tag=mn_hd)

After hearing of Microsoft's proposal,
Redhat introduced one of their own:
RESEARCH TRIANGLE PARK, N.C.-(BUSINESS WIRE) -Nov. 20, 2001-Red Hat, Inc. (Nasdaq:RHAT - news) today proposed an alternative to the settlement announced today of the class-action lawsuit against Microsoft. Red Hat offered to provide open-source software to every school district in the United States free of charge, encouraging Microsoft to redirect the money it would have spent on software into purchasing more hardware for the 14,000 poorest school districts. Under the Red Hat proposal, by removing Microsoft's higher-priced software from the settlement equation, Microsoft could provide the school districts with many more computers--greatly extending the benefits Microsoft seeks to provide school districts with
their proposed settlement...

<snip>

Open Source Now list hosted by Redhat
Red hat proposed an offer to provide the software for the schools, while MS provided the hardware since they have deeper pockets.


Date: Wed, 21 Nov 2001 18:11:24 -0800
From: "Linda Stone" <lindas@microsoft.com>
<http://www.interesting-people.org/archives/interesting-people/200111/msg00294.html>

Microsoft will be providing a $150 million initial grant and up to $100 million in additional 1-to-2 matching funds to a new education foundation. If fully funded, therefore, the foundation will have $450 million and all of that money is available for grants to local schools to buy whatever hardware and software they want. The decision on what hardware or software to utilize will be made at the individual school
level. Schools that are using Macs today -- or who want to begin using Macs -- can apply for a grant to purchase Macs and Mac-related software. The Foundation is independent of Microsoft, and it is explicitly required to make grant awards on a non-discriminatory basis.

Similarly, Microsoft will pay $160 million in cash into a separate fund overseen by the new education foundation, which will be used for technical support programs for the participating schools. Once again, the technical support programs are to be product-agnostic -- regardless of whether schools use Macs or PCs, regardless of whether schools use Microsoft software or any other software, they can receive technical
support through the programs funded by the foundation.

In addition, Microsoft will pay $90 million to train teachers,administrators and support staff in how to use the technology provided by the settlement, how to integrate technology into their curricula, and how to support the technology they use. Once again, this training will be available for Microsoft and non-Microsoft technology, depending on the products the schools select.

Microsoft will also establish a program to provide operating systems for refurbished computers, and Microsoft is required to ensure that 200,000 refurbished Pentium-class PCs and Macintosh computers are available to eligible schools each year. Once again, the proposed settlement explicitly covers alternatives to Microsoft-based PCs.

In addition to all of these hard-dollar commitments, Microsoft has also agreed to provide free software to eligible schools. The value of this software can only be estimated as it depends on the volume requested by schools, but it may exceed $500 million valued at Microsoft's heavily discounted academic prices. Once again, schools with PCs can get a wide range of PC titles free of charge, and schools with Macs can get Microsoft's Mac titles, such as Office and the Magic Schoolbus learning series. Even though Microsoft currently has very attractive academic pricing for schools, making this software available for free will be a tremendous boost for these struggling schools.

Educators from around the country have responded to this proposed settlement in a very enthusiastically -- this settlement will provide a huge boost to more than 7 million disadvantaged students and more than 400,000 teachers at our nation's neediest 12,500 schools.

Lots of people have questioned the legitimacy of these class-action lawsuits to begin with -- Microsoft has traditionally priced its products as low or lower than competitor products. Rather than waste millions of dollars by both sides on litigation, this settlement would put these issues behind us and bring enormous benefits to America's poorest schools.

I hope this information is helpful.

Linda Stone

VP, Office of the CEO
Microsoft Corporation

-----------------------------------------------

Posted at 9:38 p.m. PST Tuesday, Nov. 27, 2001
Microsoft school proposal blasted

BY KRISTI HEIM
Mercury News Apple Computer Chief Executive Steve Jobs on Tuesday criticized Microsoft's plan to give $1 billion in computers and software to schools to settle antitrust claims, saying it would give Microsoft an unfair advantage in the education market. At a hearing Tuesday in Baltimore, U.S. District Judge J. Frederick Motz asked lawyers who negotiated the settlement to respond to criticism from Apple, Red Hat and industry groups that said allowing the Microsoft donation would further entrench the company's Windows monopoly. Microsoft last week announced a proposal to settle more than 100 private antitrust cases filed on behalf of consumers by donating $1 billion in software, PCs, training and support to the nation's poorest public schools. The plaintiffs alleged that Microsoft used its monopoly power to overcharge consumers for Windows 95 and Windows 98.
http://www0.mercurycenter.com/business/center1/ms1128011.htm

Under the settlement, Microsoft would make amends by spending more than $1 billion to put software and computers into some of the poorest U.S. schools. It would assist more than 12,500 schools serving nearly 7 million children under the settlement of the private suits.``It is a settlement that avoids long and costly litigation for the company and at the same time ... really makes a difference in the lives of millions of school children in some of the most economically disadvantaged schools in the country,'' Microsoft Chief Executive Steve Ballmer told reporters last week.

CAN'T PLEASE EVERYONE

But at Tuesday's hearing, some class-action attorneys from California are expected to paint quite a different picture for Motz.The dissenting attorneys, who have filed a case on behalf of California consumers, will ask Motz to strike down the settlement or allow their lawsuits to proceed separately in California.They portray the settlement negotiated by Microsoft and the other class-action attorneys as a ploy designed to entrench the Windows monopoly while allowing the company to pay back only a tiny fraction of what it actually owes consumers.Central to the dispute is a U.S. antitrust doctrine that holds that only a ``direct purchaser'' can collect damages in private antitrust suits.The direct purchaser restriction applies nationwide, except in the more than a dozen states like California that have passed laws repealing it, said Gene Crew, an antitrust attorney heading one of the cases against Microsoft on behalf of California consumers.In February, Motz ruled that in states that had not passed the so-called ``repealer'' statutes, antitrust litigants could not recover damages from the company. That's because most consumers do not get Microsoft's Windows software directly from the company, but preloaded onto a machine they buy from a computer manufacturer.The cases in California and a handful of other repealer states, meanwhile, have been moving forward. The California case is scheduled to go to trial next August.California attorneys dissenting from the settlement are accusing Microsoft of singling out the attorneys in nonrepealer states -- those with the weakest cases -- and secretly negotiating a sweetheart deal for the company.The dissenters fear such a settlement could neutralize cases like theirs in repealer states, which they say still hold the potential for larger damage awards against Microsoft.``It was a clever tactic ... whereby they hijack the California case and use it to lend value to meritless cases elsewhere,'' Crew said.However, the settling attorneys will tell Motz the settlement is a better deal for consumers than trying to divvy up money among individuals. Michael Hausfeld, one of the lawyers who negotiated the settlement, said consumers would have gotten as little at $10 apiece if Microsoft had agreed to reimburse them directly.

EDUCATORS TO OPPOSE MICROSOFT'S DEAL: Edupage, November 28,2001
Educators are coming out against Microsoft's $1 billion proposal to provide poor U.S. schools with hardware, software, and other resources as a way to settle a slew of private class action suits, claiming that it furthers the company's monopoly in the education sector. They are also concerned that the refurbished computers Microsoft plans to donate will be inferior and cite a lack of infrastructure support within the settlement. Furthermore, Microsoft admits that schools that choose Microsoft products will have greater access to free software and other resources. Linda Roberts, private consultant and one-time director of the Clinton administration's educational technology program, said the program also lacks the follow-through needed to make it effective.

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