CES Countdown #6: Can the PC adapt to the commodity business model?

With the consumer economy changing radically and rapidly, Microsoft and others are experimenting once again with applying the pay-as-you-go model to computing, since it seems to work well enough for other industries.

In an industry where everything old is new again, only sooner, the information technology community took notice of an Ars Technica story last Monday revealing that Microsoft had, yet again, made an effort to obtain an US patent on the concept of doling out metered computing services from a centralized server complex.

It was not the first, and probably not the twelfth, time Microsoft has given serious thought to the concept of metering computer service. Arguably, it was the BASIC programming language -- originally conceived by a couple of Dartmouth professors as a way of ordinary folks to interact with terminals leased by the hour -- that drew Bill Gates and the rest of Microsoft into the computer business to begin with. And in an often-rephrased and reprinted forecast, most recently in 2003, Gates wrote for The Economist that he believed computing technology would become so well-weaved into the fabric of our lives by...well, by about now, that the computer as a singular device would no longer be separable from the rest of the information technology matrix.

"The economics of computing will also bring change. Decreasing costs will make it easy for electronics manufacturers to include PC-like intelligence and connectivity in even the most mundane devices. Eventually, computing power itself could become almost too cheap to meter. All this will lead to a fundamental change in the way we perceive computers," Gates wrote. "Using one will become like using electricity when you turn on a light. Computers, like electricity, will play a role in almost everything you do, but computing itself will no longer be a discrete experience. We will be focused on what we can do with computers, not on the devices themselves. They will be all around us, essential to almost every part of our lives, but they will effectively have 'disappeared."'

Steve Ballmer may have sent Gates a memo soon afterwards informing him that this could end up being a problem for Microsoft, whose livelihood at present depends on the notion and belief among consumers that the PC exists. But if anyone at Microsoft still believes in Gates' notion that the seams between devices and the atmospheres in which they reside are indeed disappearing, he or she may have been behind the company's latest effort to stake its intellectual property claim to the metering system for computing, for the only truly substantive and indisputable reason why such a company would have wanted to do so: to prevent someone else from doing it first, and claiming royalties later.

This latest episode has managed to revive the public's awareness of a trend that has actually been going on right under its nose for some time: the evolution and subsequent re-evaluation of how manufacturers can and should control the channel of business that links them to their customers. Literally for centuries, countries including the United States have been bound by a principle called the first sale doctrine, which boils down to this: Once someone purchases a product, it belongs to that person, and the manufacturer cannot then presume that any binding contract is in place that can prescribe what the customer does with that product.

Now, if the product is in fact a service, then conceivably the manufacturer may have some measure of control over its use. And manufacturers have tried all sorts of extremely crafty permutations to cast their products as services, typically by trying to establish a chain of intellectual property that binds the customer to using their "service" in only the prescribed fashion. (For more, take a good look at any end user license agreement.)

Among the most astounding such effort was Lexmark's 2002 defense of its printing mechanism as something akin to software, assembled in such a way that an attempt by an outsider to fill it with foreign ink constituted not only an intellectual property violation, but literally a circumvention of principles meant to protect Americans' computers from the threat of international terrorism. The US Supreme Court refused to hear Lexmark's appeal to that end in 2005, effectively certifying that whenever an American fills his printer with someone else's ink, the terrorists have not necessarily won.

But manufacturers such as Lexmark and HP had been counting on the Digital Millennium Copyright Act to help secure for them the notion that almost any kind of computing service, right down to the printed page, could be re-cast as a service, extending the concept of circumvention to such an extent that anything that falls outside of the service's prescribed use could be called infringement. Thanks to the courts, those plans may be called off for now, though the notion of software as a service -- not in the architectural sense like SaaS, but in the economic sense -- remains appealing to vendors whose bond of trust with customers has been dissolved somewhat by the a la carte and direct sales models, where purchases are made whole right off the shelves, and where the first sale doctrine most certainly applies.

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