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February 15, 2006

Microsoft, tech firms bashed at Congressional China hearing

Posted by David Hunter at 7:29 PM ET.

Foster Klug for the AP:

Four U.S. high-tech companies on Wednesday found themselves branded collaborators with the Chinese government in suppressing dissent in return for access to a booming Internet market.

House members contended that Microsoft Corp., Yahoo Inc., Cisco Systems Inc. and Google Inc. sought to explain their business practices in China only after a recent crush of negative media and government attention.

“Your abhorrent actions in China are a disgrace,” said Rep. Tom Lantos, the top Democrat on the House International Relations Committee. “I simply don’t understand how your corporate leadership sleeps at night.”

Microsoft’s associate general counsel, Jack Krumholtz, said his company was committed to staying in China because of the Internet’s potential for eventually allowing free access to information. “We think the benefits far outweigh the downside, in terms of promoting freedom of expression,” he said.

Ben Elgin at BusinessWeek online suggests that the politicians aren’t the only ones doing some posturing:

Execs at these companies, which include Google, Yahoo!, and Microsoft, will likely respond to criticisms much as they have in recent weeks and months: by painting their China conundrum in the starkest black-and-white terms. They must toe the party line of the repressive regime, say the companies, or be banished — robbing the Chinese people of the rich array of Internet services that they provide

Trouble is, this is a vastly oversimplified argument, shielding the much more subtle and debatable tradeoffs being made by these companies.

In December, the company (Microsoft) sparked a storm of protest when it removed a Chinese blogger at the government’s demand. Trouble is, Microsoft removed the blog for all viewers, not just inside China. And it offered no notification to readers as to what had happened. Since the incident, the company has revised its policies, promising to be more transparent.

But Microsoft has yet to answer other pressing questions. The blog it removed at the Chinese government’s request was actually hosted on a computer inside the U.S. Microsoft says it doesn’t go by location of servers when determining a government’s jurisdiction, but rather how a user sets his or her profile on its MSN sites.

Does this mean that a blogger inside China can set their nationality and residence as something other than China and operate completely beyond the reach of China’s censors? On the flip side, if Chinese authorities can order a blogger off of a U.S. server, how far can their tentacles reach when it comes to more sensitive areas, such as e-mail info?

Microsoft officials say they’re currently working on these issues and point to their recently released guidelines for how they will handle censorship requests for its blogging service. That, however, should be the type of thing an Internet company in China has completely thought through and disclosed to users before diving headlong into this market.

You’d certainly think so, and like it or not, it looks like they are going to get some help as Joel Rothstein and Paul Eckert report at Reuters:

The Republican chairman of the subcommittee, Chris Smith of New Jersey, held the hearing to ask the companies about their procedures in China and demands from the Chinese government.

Smith said he planned to introduce a bill this week to formalize the goals of a new State Department task force to help American technology companies protect freedom of expression in countries that censor online content.

The bill will include export controls on certain types of hardware and software and prohibit putting e-mail servers and other assets in countries that lack U.S.-style due process laws, Smith said.

“If a company allows itself — in its filtering capability — to filter terms such as ‘democracy’ and ‘religious freedom,’ they will be in violation of U.S. law,” Smith told Reuters regarding the proposed legislation.

I get the feeling that this issue is just getting started. More on the prospsed legislation here.

Filed under Cisco, Coopetition, General Business, Google, Governmental Relations, Yahoo

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