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Simon Phipps's personal commentary

Brazil's Tax Breaks for Open Source

If you've been following the progress of the "PC Conectado" initiative in Brazil (and if you have, congratulations because the northern hemisphere's press has largely ignored it), you'll know that Microsoft was fighting hard to be included in the scheme. News reaches my ears that yesterday they were firmly excluded from it at the official launch. This is a massive step - it makes Brazil the first country (to my knowledge) offering tax breaks for using open source software. Wow. I hope you're beginning to understand my respect for the place (it's not just that I enjoy caipirinhas, really...)

If you have no idea what I am talking about, here's the detail.

PC Conectado is part of the Brazil's initiative to erode the digital divide - what they would call a "Digital Inclusion" initiative (I think that sounds much better). The New York Times wrote about it back in March:

Under the program, which is expected to offer tax incentives for computer makers to cut prices and a generous payment plan for consumers, the government hopes to offer desktops for around 1,400 reais ($509) or less. The machines will be comparable to those costing almost twice that outside the program.

As well as a low price, the scheme also allows computers to be offered on credit terms that mean even relatively poor citizens will be able to join in. The catch? The software on the machines has to be open source - after all, why would the government want to subsidise a program that just feeds proprietary addiction?

"For this program to be viable, it has to be with free software," said Sérgio Amadeu, president of Brazil's National Institute of Information Technology, the agency that oversees the government's technology initiatives. "We're not going to spend taxpayers' money on a program so that Microsoft can further consolidate its monopoly. It's the government's responsibility to ensure that there is competition, and that means giving alternative software platforms a chance to prosper."

The whole thing is anchored on a tax incentive system, hence my title "Tax breaks for open source", but it's clearly not just about low-cost computing - the open source requirement also preserves people's liberty. Free markets are fine things but most of us recognise they need regulation once monopolies emerge. To my mind, there is a strong sense in which the "digital divide" is the product of unrestrained monopoly power exercised through data-format lock-in and consumer inertia.

Smelling a revenue opportunity (this initiative will apparently double the size of the Brazilian personal computer market), Microsoft tried the usual weasel-words and offered a reduced-function software package as an initial purchase with one of the subsidised PCs. But why they bothered escapes me, having seen their strategy for working with the government there (and having seen first-hand how well it is understood).

Their strategy is one that Bill Gates himself once described thus:

They'll get sort of addicted, and then we'll somehow figure out how to collect sometime in the next decade.

In other words, make the initial purchase low cost then make revenues from upgrades and data-format lock-in. Microsoft Brazil are clearly embarrassed by that strategy, since they tried to threaten the architect of Brazil's digital inclusion policies with a law suit when he mentioned it in a speech recently. They managed to whip the political opposition into a frenzy supporting their "freedom" and many of us thought that yesterday's announcement would contain a politically-inspired concession towards them. But as Carlos Chernij, of Plantão INFO wrote (in Portuguese, I have used Google to translate):

The decision of the government finished eliminating the possibility of the Microsoft to participate of the program. The company intended to offer its system Windows XP Starter Edition as option for the manufacturers.

My congratulations to the team for holding firm.

This is only one of many initiatives in progress in Brazil. When I was there last year I had the opportunity to visit one of São Paulo's Telecentros, community centres featuring free internet access for local citizens. These use a low-cost thin client approach and also offer an open source desktop with full productivity tool support care of OpenOffice.org. They're using the lowest imaginable cost of PC and then running remote desktop sessions to a server in a corner of the building that then has internet access. It's offering hundreds of thousands of people the chance to stay in touch with friends worldwide, engage in online training, access government services and use a computer for correspondence. Maybe it's part of the reason the Brazilians have taken over Orkut.

Why is this all significant? Well, as I said in an interview in Brazil, I am convinced that Brazil has a key role in defining the way that open source software can be pragmatically socialised as a part of modern society. Their national situation makes bold initiatives necessary. Their relatively short history as a free market makes the stranglehold of the monopolists that blight the rest of the free world less strong. And the unstoppable optimism and energy of the people (really, you have to visit to appreciate it) makes the bold moves actually have a chance of working.

And it's not something that's just going to stay isolated in Brazil either. The launch of the new World Open Source Software Organisation this week, spearheaded by the Brazilians, is going to spread this sort of thinking across the developing world (WorldChanging comments too). While the US heads in the direction of the rule of the Generals, the developing world is designing a new, collective economy. Maybe China and India aren't the only places we should all be watching?

posted at 4:32 PM (UK) | |