By Robert X. Cringely

Just over three years ago I wrote a column titled "Cooking the Books: How Clever
Accounting Techniques are Used to Make Internet Millionaires." It explained how
telecom companies were using accounting tricks to create revenue where there
really was none. Take another look at the column (it's among the links on the "I
Like It" page), and think of Worldcom with its recently revealed $3.7 billion in
hidden expenses. Then last August, I wrote a column titled "The Death of TCP/IP:
Why the Age of Internet Innocence is Over." Take a look at that column, too, and
think about Microsoft's just-revealed project called Palladium.

The end is near.

Sometimes I'd rather be wrong, but it's a no-brainer to guess that accountancy,
which has apparently become something of an art form or interpretive dance, could
have a dark side. And you'll never lose money betting for Microsoft and against
Microsoft's competitors and customers.

Let's concentrate on the Microsoft story. Last August, I wrote of a rumor that
Microsoft wanted to replace TCP/IP with a proprietary protocol -- a protocol
owned by Microsoft -- that it would tout as being more secure. Actually, the new
protocol would likely be TCP/IP with some of the reserved fields used as pointers
to proprietary extensions, quite similar to Vines IP, if you remember that
product from Banyan Systems. I called it TCP/MS in the column. How do you push
for the acceptance of such a protocol? First, make the old one unworkable by
placing millions of exploitable TCP/IP stacks out on the Net, ready-to-use by any
teenage sociopath. When the Net slows or crashes, the blame would not be assigned
to Microsoft. Then ship the new protocol with every new copy of Windows, and
install it with every Windows Update over the Internet. Zero to 100 million
copies could happen in less than a year.

This week, Microsoft announced Palladium through an exclusive story in Newsweek
written by Steven Levy, who ought to have known better. Palladium is the code
name for a Microsoft project to make all Internet communication safer by
essentially pasting a digital certificate on every application, message, byte,
and machine on the Net, then encrypting the data EVEN INSIDE YOUR COMPUTER
PROCESSOR. Palladium compatible hardware (presumably chipsets and motherboards)
will come from both AMD and Intel, and the software will, of course, come from
Microsoft. That software is what I had dubbed TCP/MS.

The point of all this is simple. It may actually make the Internet somewhat
safer. But the real purpose of this stuff, I fear, is to take technology owned by
nobody (TCP/IP) and replace it with technology owned by Redmond. That's taking
the Internet and turning it into MSN. Oh, and we'll all have to buy new
computers.

This is diabolical. If Microsoft is successful, Palladium will give Bill Gates a
piece of every transaction of any type while at the same time marginalizing the
work of any competitor who doesn't choose to be Palladium-compliant. So much for
Linux and Open Source, but it goes even further than that. So much for Apple and
the Macintosh. It's a militarized network architecture only Dick Cheney could
love.

Ironically, Microsoft says they will reveal Palladium's source code, which is
little more than a head feint toward the Open Source movement. Nobody at
Microsoft is saying anything about giving the ownership of that source code away
or of allowing just anyone to change it.

Under Palladium as I understand it, the Internet goes from being ours to being
theirs. The very data on your hard drive ceases to be yours because it could
self-destruct at any time. We'll end up paying rent to use our own data!

Can you tell I think this is a bad idea?

What bothers me the most about it is not just that we are being sold a bill of
goods by the very outfit responsible for making possible most current Internet
security problems. "The world is a fearful place (because we allowed it to be by
introducing vulnerable designs followed by clueless security initiatives) so let
us fix it for you." Yeah, right. Yet Palladium has a very real chance of
succeeding.

How long until only code signed by Microsoft will be allowed to run on the
platform? It seems that Microsoft is trying to implement a system that will
enable them, once and for all, to charge game console-like royalties to software
developers.

But how will this stop the "I just e-mailed you a virus" problem? How does this
stop my personal information being sucked out of my PC using cookies? It won't.
Solving those particular problems is not Palladium's real purpose, which is to
increase Microsoft's market share. It is a marketing concept that will be sold as
the solution to a problem. It won't really work.

Let's understand here that not all Microsoft products are bad and many are very
good. Those products serve real customer needs and do so with genuine purpose,
not marketing artifice. But Palladium isn't that way at all. This is NOT about
making things better for the user. This is about removing the ability for the end
user to make decisions about how his or her computer functions. It is an effort
by Microsoft to take literal ownership of Internet technology, Microsoft's
"embrace and extend" strategy applied for the Nth time, though on a grander scale
than we've ever seen before. While there is some doubt that the PC will survive a
decade from now as a product category, nobody is suggesting the Internet will do
anything but grow and grow over that time. Palladium assures that whatever
hardware is running on the network of 10 years from now, it will be generating
revenue for Microsoft. There is nothing wrong with Microsoft having a survival
strategy, but plenty wrong with presenting it as some big favor they are doing
for us and for the world.

What's saddest about this story is that it could be positive. The world is a
dangerous place and finding ways to make people responsible for what they do on
the Net is probably good, not bad. I just don't think we have the right people on
the job