Microsoft And The China Question

Microsoft  is denying a report from the British Broadcasting Corp. that the company was considering withdrawing from China due to the hard-line government’s repressive treatment of technology users.

The BBC Web site ran a story Thursday, quoting Fred Tipson, senior policy counsel for the company. Tipson was in Athens, Greece, as part of the Internet Governance Project and part of a panel called “Freedom of Expression and Internet blocking and filtering.”

“Things are getting bad…and perhaps we have to look again at our presence there,” he was quoted as saying. “We have to decide if the persecuting of bloggers reaches a point that it’s unacceptable to do business there.”

Tipson and Art Reilly, a senior director at Cisco, had earlier in the day fended off accusations that their companies had been working with the Chinese government to stifle dissent.

However, when asked for comment by, Tipson refuted the BBC report.

“Microsoft will continue to offer services and communications tools in China. Contrary to one press account of my comments in Athens at the Internet Governance Forum, I did not suggest that Microsoft was considering the suspension of our Internet services in China or that restrictions in China are getting worse. On the contrary, as the entirety of my presentation makes clear, I emphasized the positive impact of the Internet in China,” he said in a statement.

On this point, he and the BBC are in agreement. He is quoted as saying: “The economic value in the Internet is driving growth and development in educational opportunities [in China],” and that the Internet “is transforming the political culture of China. There is no question about it.”

Tipson went on to say that the discussion at the Athens meeting was not limited to China, and that he had been asked whether an Internet services company would ever consider suspending or terminating services in reaction to the restrictive actions of a government.

“I said that every company must consider the best interests of its customers, including those in China, and that if we ever concluded that conditions in a country made that positive impact impossible, we would have to consider suspending or ending them. I did not say that China was in that category,” he wrote.

Tom Kucharvy, senior vice president with Ovum Summit, doubted Microsoft could pull out of China even if it wanted to.

“With the growth opportunities and the strategic opportunities in global R&D, especially when Microsoft already has facilities there, I think it would be hard-pressed to pull out,” he said.

This is not the first time a technology firm has run up against the strong-arm government that runs the most populous nation on the planet. Google caught flak for offering a censored search engine in China.

Critics cried hypocrisy when Google  later told the U.S. federal government to go pound sand when it requested search information as part of a case in which it is defending online child pornography laws.

Amnesty International has been very critical of Google, Microsoft and Yahoo  for bending to the demands of the Chinese government about Internet site blocking.

Kucharvy said it’s a no-win situation for tech companies. “China is a huge market, it’s a strategic market and it has the potential in playing a fundamental role in the future of the IT industry,” he said.

The question becomes: is losing out on such a huge market worth losing out on personal principles.

“Companies can make decisions based on political philosophy, deeply-rooted ideological commitments to human rights, but to the extent that they make those decisions that fundamentally effects their business, a public company in particular could open itself up to shareholder lawsuits,” said Kucharvy.

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