Open Source Windows replacement, MPEG coming out of the East

Highly feasible

The Japan news daily Nihon Keizai Shimbun last week revealed that China, Japan, and Korea are planning to jointly develop a new open-source operating system aimed at replacing Microsoft's Windows, something that the Linux community has been trying to do for years. Given that most of the major Japanese firms feel enslaved in their PC efforts by Windows and that the Japanese electronics firms have virtually pledged their future to some form of embedded Linux, it is likely that the outcome will be Linux derived.

Specifics of the deal will be hammered in private by the end of 2003 after initial discussions began back in March when an inaugural meeting was attended by more than 100 software engineers from the three countries.

Perhaps significantly the Far Eastern Bloc can do what no anti-trust suit has so far managed and re-introduce innovation at the PC level, where constant bundling activities by Microsoft have held it at bay. Japanese electronics firms such as Matsushita, Sony and Toshiba are used to establishing standards that leave a level playing field, and lets them build their own product differentiation at a higher level.

The operating systems, once built will eventually expand into the Asia Pacific. China has the power one day, as an emerging economy, to double the size of the PC marketplace, and if it were to tamely endorsed Windows it would have doubled Microsoft's size. If it can use this market power to introduce a new system, it could potentially destabilize the Microsoft operating system outside, as well as inside, the Far East, although it is likely to take time, perhaps as long as 8 to 10 years to affect the West. In the meantime China, Korea and Japan will almost certainly have to weather various US government and GATT sanctions if they see through this threat.

This move is typical behavior for a major economic power that has been left behind.

China surprised the wireless industry three years ago by picking an alternative Mobile phone standard for third-generation phones, TDS-CDMA. Now that it has taken the global pole position in terms of both making televisions and buying televisions, it wants to come out with its own digital TV formats and video standards for DVD players and video-game platforms.

Another place where, according to a piece in this week's Wall Street Journal, China is set to make a move, is in its acceptance of MPEG video compression. China doesn't see why it has to pay royalties on a standard that was built before China could contribute to the process. The Journal pointed out that Chinese DVD-player makers pay between $3.50 and $5 a machine to the Japanese and European firms that own video patents, for access to the MPEG technology that compresses the DVDs. A Beijing group has put forward the Audio Video Coding Standard (AVS) which should be completed by the end of 2003, with products shortly afterwards.

The Beijing-based Audio-Video Coding Standard, or AVS, group aims to publish a standard by the end of the year that will compete with MPEG 4, engineers in China began working on it a year ago after realizing that the new MPEG 4 H.264 encoding would also be created without their help and looks likely to stay as the compression standard for the next decade. Given noises made by Japanese manufacturers of phones last year over the usage based royalty scheme suggested for MPEG, where they said that they may not use it, the Chinese codec is likely to find a willing market in Japan as well.

Faultline Opinion

We think that the Windows alternative is highly feasible. No-one in the history of the planet has established a permanent monopoly with something that it relatively easy to build. China probably only needs to put 500 to 1000 people on a project of that type for two years or so, and it has the political weight to mandate its use internally.

However, outside of China, in Japan for instance, such an effort will meet stiff resistance from habit users and from simple economic forces. All the effort needs to be around a single initiative for it to be successful and the Open Source model is focused on Linux. Where would all the applications come from for this new format?

Codecs are two a penny though and are often built by teams of three or four mathematicians. It is likely that there will be more codec experience in the West where MEPG 4 has many competitors, including Microsoft.

Copyright © 2003, Rethink Research

Faultline is published weekly by Rethink Research and is edited by Peter White.

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