A Cheaper Windows for All?

By David Coursey  |  Posted 2004-11-19

A Cheaper Windows for All?

If Microsoft can sell a less-expensive version of Windows XP in the developing world, why cant Americans buy it too? What have Thailand, Malaysia and Russia done to help Microsoft become the company it is today?

Americans and Europeans have long been subsidizing Microsofts global adventures, so if theres a better deal out there, dont we deserve it too?

Earlier this month, Microsoft began offering a Window XP "Starter Edition" to customers in Thailand. There are plans to offer additional localized versions of Windows in Southeast Asian markets as well as India and Russia.

Steven Vaughan-Nichols wonders why the U.S. cant get a slimmer XP. Read his views here.

According to Mike Wickstrand, the group product manager for Starter Edition, Microsofts goal is to help hardware makers create hardware thats much less expensive than whats available today. A target customer, according to Wickstrand, is "the woman who makes $6 a day selling papaya salad" in Thailand and her equivalent elsewhere in the developing world.

That Microsoft also wants to make inroads into these potentially lucrative markets before Linux is able to take over almost goes without saying. To this end, Microsoft is reportedly selling Starter Edition for as little as half what OEMs play for Windows HP Home Edition.

Wickstrand told me that the major difference between "Starter Edition" and the Windows XP sold with most new PC is that file and printer sharing have been removed. Networking remains in, however, including broadband and wireless.

Also included are help files and a dozen training videos, all presented in the local language. Wickstrand said the videos do such things as teaching mouse skills to someone who has never seen a pointing device.

And theres one more thing I almost forgot: Starter Edition isnt available in English, a convenient way to keep it off the computers of people who Microsoft believes should pay full price for its operating systems—people like you and me.

The introduction of the Thai language Starter Edition came only weeks after Microsofts No. 2 man, Steve Ballmer, called for the industry to develop a $100 PC, priced to make computing ubiquitous in poorer nations while also helping to end the rampant software piracy that occurs there.

Did Ballmer say Linux violates more than 200 software patents? Find out here.

This is a laudable goal for hardware vendors, who thus far have had trouble cracking about $175 on a routine basis, and then only for desktop machines running some version of Linux or Suns Java Desktop.

Next Page: The biggest challenge to creating a $100 PC.

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However, the biggest challenge to be overcome in creating a $100 Windows machine may not be the actual hardware cost, but what Microsoft charges for the Windows OS.

Presuming that hardware OEMs are paying no more than $10 a copy for a non-Windows operating system, using Windows instead would raise the current $175 price to $225 to $250. This estimate is based on Microsofts reported $50-to-$75-a-copy pricing for Windows XP Home Edition sold to hardware manufacturers.

This is roughly what Microsoft has been charging on a per-PC basis for as long as I can remember. Of course, that pricing started back when you couldnt buy a decent PC for less than $1,000. As hardware prices have fallen, Microsofts share of PC revenue has increased, even if its pricing hasnt.

Enter Starter Edition, which reportedly sells to OEMs for about $35 a copy. Apply that to my $175 PC and the price comes up to $200. This is interesting considering that the low-end "Starter Edition" PCs being sold in Thailand sell for the equivalent of $300 to $400.

Read more here about Microsoft readying its latest "XP Starter Edition" releases to be sold in Thailand, Malaysia and Indonesia.

For that money, I can go to several local stores and purchase a PC with a fully functional copy of Windows XP Home Edition. So much for Starter Edition making PCs less expensive.

Over time, however, this will probably happen. But if Starter Edition is good enough for the teeming masses, why isnt it good enough for us? I know potential customers in the city where I live who dont need file or print sharing but do need better help files and videos. These are kids and the elderly, who could also use a price break.

Is it fair for Microsoft to charge a lower price in the developing world than it does here at home? Dont low-income Americans deserve the same price break Microsoft gives a Russian? The case can me made that "poor" in the United States doesnt compare with "poor" in Thailand, but I suspect a person there who can afford a $300 Starter Edition PC lives as well or better than an American who can only afford such a computer.

Related to this, I wonder if Microsofts OS competitors in foreign markets could claim that Microsoft is "dumping" software for less than what it costs to produce, based on its American and European pricing? Thats one for the World Trade Organization, I suppose.

Lowering prices to combat Linux is a Catch-22 for Microsoft, which needs the huge profits Windows and Office generate to support the unprofitable parts of its businesses and its giant research-and-development effort.

For more insights from David Coursey, check out his Weblog.

Ballmer has correctly noted that the world really does need a lower-priced Windows PC if computing is truly to become global (and desktop Linux isnt). And, to be honest, I dont mind paying a little more for my OS and letting poor people pay a little less. Computers really do change lives, mostly for the better. But in a free-market, free-trade world is that sort of pricing really fair?

The problem for hardware vendors who share Ballmers vision is designing and manufacturing a PC that can be sold at such a low price point. For Ballmer, the problem is making the numbers work over the long haul. That means competing with Linux on price in developing nations while still raking maximum profits out of developed ones. It will be interesting to see whether Microsoft customers in some countries are willing to pay higher prices that subsidize other customers buying essentially the same product for less money just because of where they happen to live.

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