Governments’ interest in free/open source software is steadily increasing. Several policies aimed at supporting free/open source software have been taken or are currently under discussion all around the world. In this chapter, we review the basic (economic) rationales for such policy interventions and we present some summary statistics on policies taken within the European countries. We claim that in order to evaluate correctly the consequences of such interventions one has to consider both the role and the administrative level at which such decisions are taken as well as the typology of software that is involved. Moreover, we argue that the level playing field cannot be taken for granted in software markets. Therefore, non-intrusive public policies that currently prevail at the European level in terms, for instance, of the promotion of open standards or in terms of campaigns aimed at informing IT decision-makers, are likely to be welfare enhancing.
Key Terms in this Chapter
Customers’ Lock-In: A situation in which a customer is so dependent on a vendor for products and services that he/she cannot move to another vendor without substantial switching costs, real and/or perceived.
Source Code: The programming that allows software programs to perform certain actions or functions.
Proprietary Software (PS): Software products that are designed in such a way that others cannot access or view a product’s source coding/the programming that allows the software to perform certain functions.
Intellectual Property Rights (IPRs): Intellectual property is a term used to refer to the object of a variety of laws, including patent law, copyright law, trademark law, trade secret law, and industrial design law. These laws provide exclusive rights to certain parties over intangible subject matter or over the product of intellectual or creative endeavor; many of them implement government-granted monopolies.
Economic Regulation: Set of restrictions promulgated by government administrative agencies through rulemaking supported by a threat of sanction or a fine. The main scope for government’s regulation is to prevent markets’ failures, in other words, situations in which markets do not efficiently organize production or allocate goods and services to consumers (as in the presence of a monopoly/dominant firm).
Essential Facility: In a vertically related market, it is defined as a facility, function, process, or service that meets three criteria: it is monopoly controlled; a potential competitor requires it as an input to provide services and to compete downstream with the monopoly supplier; and it cannot be economically or technically duplicated. Facilities that meet this definition shall be subject to mandatory unbundling and mandated pricing.
Total Cost of Ownership (TCO): Financial estimate aimed at helping consumers and enterprise managers to assess direct and indirect costs related to the purchase of any capital investment, such as (but not limited to) computer software or hardware.