DRAFT

Last update: $Date: 2003/01/21 20:22:54 $ UTC

Consumer license study: software "piracy", free software, and economic impacts

Summary

The Business Software Alliance (BSA) produces a yearly North American Software Piracy Study. The Canadian Alliance Against Software Theft (CAAST) then sends out media releases into the Canadian market, as well as lobbying the Government of Canada, based on these studies.

These studies have critical flaws due to the fact that they are focused entirely on the perspective of the vendors who are members of the alliance. Two areas are of particular concern:

Consumer groups know the harm that can be caused by measurements that try to hide both good and bad outcomes in statistics. This will lead to policy that may "throw the baby out with the bathwater". The advantages of FLOSS to consumers and the majority of the economy must be highlighted over the alleged harm to the BSA/CAAST member subset (of the software manufacturing subset) of the software industry.

BSA study methodology

The Provincial Piracy Study for 2001 details their methodology in section C. of the report.

The "Canadian Provincial Software Piracy Study for 2001,", like the "2001 BSA Global Software Piracy Study," consists of comparing two sets of data, the demand for new software applications and the legal supply of new software applications.
For demand they use estimated demand of member software. They then compare this to actual shipments of their software. The biased estimations of demand are simply a case of wishful thinking on the part of the alliance member vendors, and not based on objective analysis.

A computer that is shipped without any member-software could be equipped by the home, business or government user with a full set of FLOSS tools such as what is included in a Linux distribution. A typical modern Linux distribution contains all the software required to interact with the Internet, to do office automation such as word processing and spreadsheet, and most other common software uses.

In fact, most distributions contain consumer choice between FLOSS browsers and office suites. These tools provide compatibility with (and often drive the standardization of) relevant open standards, and in some cases provide file compatibility with legacy file formats such as those used by Microsoft Office.

As an alternative, a computer shipped without any member software could be being used to illegally copy and use software from those members. Their methodology does not differentiate the extremely good (for the consumer) option of the usage of FLOSS from the alleged bad (for the vendor) option of illegally copied software.

Economic Impact

If we focus on the economic impact of the option where a consumer has chosen FLOSS over BSA/CAAST member software, we get a very different picture.

First part of this alternative analysis is to recognize that any cost to consumers of software beyond the cost of production should be registered as a loss to the general economy, not a gain to the Software Manufacturing vendors. In the highly competitive Free Software market, where incumbent players are not able to extract monopoly rents for their software, the cost to consumers of software very quickly approaches the cost of production.

Beyond the cost of royalties that exists for BSA/CAAST member software, but not for Free Software, are hidden costs often associated with the Total Cost of non-Ownership (TCnO). More details on TCnO, as well as the business models for proprietary software (Software Manufacturing, which the BSA/CAAST members are dependent on) and Free software, can be found Brendan Scott's article on Why Free Software's Long Run TCO must be lower.

The retail market for proprietary software is also a lower-skilled market, and thus lower paying, than a market focused on software as a service. Software Manufacturing resellers simply offer retail support for pre-packaged software. Free Software encourages more direct customer needs driven relationships, treating software as a service rather than a possible "one size fits all" product. These services can simply involve training and system integration as exists currently, but can also involve customer customization of software which is not always legally or technically possible with proprietary software.

Beyond simple monetary savings, Free Software also avoids the administrative and social costs associated with proprietary software End User License Agreements (EULA) compliance uncertainty. EULA's are often product specific requiring per-product analysis for compliance, and often contain clauses of questionable enforceability and/or legality. Even the most diligent of proprietary software users are likely to not be compliant with all the requirements of all the software they use. Mose end users of software do not have the legal background to adequately evaluate the EULA.

In contrast, most FLOSS suites make use of a small set of generic software licenses which can be understood once for many different products from multiple vendors. These licenses also primarily put responsibilities on re-distributors or producers of derivative works. Most aspects of the licenses offer additional rights to end users rather than often confusing and complex responsibilities.

Definitions, and further reading

The use of the term Free Software is as defined by the Free Software Foundation (FSF). The use of the term Open Source is uses as defined by the Open Source Initiative (OSI). The first known usage of the term FLOSS was as part of the Free/Libre and Open Source Software: Survey and Study commissioned by the European Commission.

Media and consumer attention for CAAST publicity of the study has been linked via a FLORA Weblog article. This includes a letter to the editor that I sent to ITBusiness.ca titled Proud Free Software Canadian counts as "pirate" by CAAST.

A sample project proposal for the Government of Canada was offered in the article A modest proposal: Government of Canada Free Software Office Suite. Related is ongoing international work on office automation file format standardization, most of which use the OpenOffice.org file format as the basis for their work.


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