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"Arguing in My Spare Time," No. 4.22
by Arnold Kling
July 28, 2001
The anti-Microsoft coalition never misses an opportunity to miss an opportunity. Consider Sun Microsystems.
Based on the foregoing, what does Sun Microsystems President Scott McNealy do? He treats Microsoft Passport with more disdain than Yasser Arafat treated Ehud's Barak peace offer at Camp David.
The Passport service, as I understand it, will provide a central place where I can identify myself when I am on line. That is, rather than type in a user name, password, address, credit card number, and so on in every web site that I visit, I will store this information in a central location. Once I log into the central location, I can--if I choose--be a known entity at any web site that I visit.
If this works, it will facilitate electronic commerce in a number of ways. First, it will reduce the time and effort it takes to buy on line. In effect, you have "one-click ordering"™ everywhere. Second, it has the potential to allow web sites to pool their offerings in various ways. They might charge micropayments, which could be aggregated as part of the Passport service. Or they could form clubs and charge subscriptions, which could be efficiently managed by the Passport service.
Technology journalists like to use the "battle" metaphor. They say that Microsoft has won the battle for the desktop. They talk about the battle for the Internet, as if it were one large battle, and as if a single company has a chance to win.
One way to understand the issue of a privacy/payment infrastructure is that it is a battle over the monthly statement. When the proper infrastructure is in place, I will be able to see all of my Internet purchases on a single monthly statement. The company that sends me that monthly statement will have won that battle, so to speak.
As far as I am concerned, the privacy issue that arises from the battle over the monthly statement boils down to this:
From the standpoint of controlling the monthly statement, Microsoft's main competitors could not be worse. Consider
Welcome--You've got pop-up ads! They have been doing intrusive marketing to their customers since day one. If the company that bought Time-Warner is going to refrain from overbearing cross-selling, then I'm Elmer Fudd.
When you open up the envelope with your monthly statement, you're lucky if you can even find your bill buried in all of the advertising circulars. Now, if you so much as call the credit card company to find out your balance, you have to listen to a barrage of ads first.
I used to have DSL service from CAIS Internet, an Internet Service Provider. Earlier this year, Verizon, the local phone company which controls DSL service, started billing me for DSL. The bill came as part of my phone bill.
When I called Verizon to complain about being charged for DSL (I was already being billed by CAIS), they asked for my DSL account number. Since it was a CAIS number, it was not in their database. Since I did not have a DSL account, they shut off my DSL service (but kept sending bills.) I had no choice but to cancel my CAIS account, because I no longer was getting any service from them. That's one way for the local phone company to eliminate the competition!
The phone company has too much power already. When I contacted the public service commission to ask for help with my dispute with Verizon, they were very reluctant to do so. The conversation went,
(public service commission): We do not regulate DSL service. We only regulate phone service.
(me): But this is on my phone bill! And if I do not pay, they are threatening to cut off my phone service! That's why I'm calling you. If this were only about DSL, I would not need your help!
For me, the worst possible outcome in the battle of the monthly statement would be for the local phone companies to win. I would like to see a law forbidding local phone companies from adding anything to the local phone bill.
This was the holy grail McKinsey business model of the Internet Bubble. A company would capture huge databases of consumer activity on the Web, crunch the data, and engage in powerful targeted marketing to consumers. The idea is that the company that collects the data will use extract value from the data.
I think that a lot of people who are opposed to Microsoft Passport are assuming implicitly that Microsoft buys into the Infomediary model. Instead, everything I have read suggests that Microsoft buys into the opposite model, which is that consumers own the data, and the data is stored on their behalf.
The monthly statement that I feel best about is the one that I get from Vanguard, the mutual fund company. I do not think this is simply because the statement does not include a bill--the way the stock market has behaved, mutual fund statements lately are not exactly "good news."
Vanguard strikes me as having an efficient, accurate back office system. Their sales pitches come in separate envelopes from their account statements. And their sales pitches are for their own products, not third party ride-alongs.
Vanguard has had to think about data protection issues. They don't want other people accessing my account, and I believe they have figured out how to minimize the chances of this.
What I would like to see is a partnership between Microsoft and some of the good guys, such as Vanguard. I would like to see Microsoft provide software that enables me to consolidate my passwords and store all of my data in a central place.
However, I would like a choice about where my data is stored. If Vanguard gets into the business of being a personal data custodian, I would be happy to store my data with them. If not, then there may be other companies that I would prefer. If my only option is to use Microsoft as a data custodian, I will be more hesitant to use Passport.
At this point, however, my biggest fear is not that Microsoft will use Passport to win the battle of the monthly statement. My biggest fear is that anti-Microsoft hysteria will kill Passport and thereby hold back electronic commerce and the prospects for a recovery in the technology sector.