With the release of President Clinton's grand jury video, it is even easier to see why Bill Gates doesn't want to testify in public. Behavior that looks great to your lawyer generally doesn't look good to the world.

But Bill Gates has much more to be afraid of than just a bad hair day in court. Two weeks ago I laid out the threat to Microsoft posed by Linux. That column created a somewhat positive furor in the nerd community and got me thinking even more about the power of free stuff and the threat it poses to those selling stuff that isn't free.

Microsoft clearly feels the threat of free software, not only in their reaction to Linux, but also in their recent move to hurt Samba. This unannounced but highly subversive move is a good example of the New Microsoft.

Samba is a freeware application originally written in Australia by Andrew Tridgell. Samba allows Unix and a mess of other operating systems to use the Server Message Block (SMB) communications protocol. This protocol was used by OS/2 LAN Manager file servers and is now primarily used by Windows NT and Windows 95/98 computers. When Microsoft refers to the "built-in file sharing" capabilities of its operating systems, they are referring to the SMB protocol.

Remember that Windows NT has been nibbling away at Netware as the dominant server operating systems for PC local area networks. Samba, which is free and runs like a champ on Linux, which is also free, makes those NT servers unnecessary. You can run Samba and Linux instead. Microsoft does not like this. And since Samba and Linux generally work better than NT anyway, Microsoft has a further reason to be upset.

Microsoft made some changes to the way Windows NT implements SMB when it released Service Pack 3 for Windows NT 4. One of these changes was to implement encrypted passwords during user authentication. Since Samba did not use encrypted passwords, there was a change that needed to be made to the Windows NT registry to force clear text passwords. Windows 98 also transmits encrypted passwords unless the registry is modified.

The instructions for making these changes were available on Microsoft's support Web pages at the end of July. No more. Checking back on September 18, the instructions were gone along with any reference to Samba ever having existed. This has the quality of a Hitchcock movie where someone disappears and suddenly everyone is claiming to the hero that the person never even existed. The Microsoft search engine found no information when it searched for "Samba".

Searching for the same information using other key words such as "LanMan," "Lan Manager," "SMB," and "smbd" also yielded nothing. The knowledge base also allows a user to specify a particular article number for retrieval. The article we want is Q166730, which is suddenly no longer in the knowledge base.

Samba must die.

With the upcoming antitrust action against Microsoft, the removal of this information seems odd. This was a decision to remove existing support, not discontinue future support, for a competing product. But the most interesting aspect is how it shows Microsoft has become fearful of free software.

Microsoft should be afraid. Free is a very powerful concept and one that holds more power than most of us can even imagine. Free is making more sense to me all the time. Microsoft hates free.

What would happen if the MTA - the New York subway system — was made free? What would happen if anyone in New York could just hop a subway train anytime and go uptown, downtown, or just get warm on a winter night? I think it's easy to predict that there would be a loss of subway revenue and a gain in subway ridership. But what would be the second order results? The subway system would lose the 15-20 percent of budget represented by the fares, but they would also lose the need to collect, process, count, and enforce fares. It probably costs nearly as much in fare overhead as the fares yield. The biggest hit would be in qualifying for federal transportation grants, which generally require fare-based local contributions.

And what would be the third order effect of no fares - the effect on the local economy and local taxes? They couldn't help but increase with more people able to get to work or shopping, more general activity among the people and more economic activity as a result. This is not the result of some formal study of mine and I'm certainly not talking about Laffer curves and supply side economics, but I wouldn't be surprised if free subways made more money for New York than running subways the way they have always been run.

Now jump back to information technology. The way to create market share is to lower the barrier to entry so far that it is no longer seen as a barrier. Free is no barrier at all. Free created the Minitel system in France because the terminals themselves cost users nothing. Minitel went from zero to four million users in nothing flat. The way to steal market share is to make something free. Microsoft knows that. Look at Internet Explorer for proof. Before that look at Microsoft Money. Look at the cell phone business. Making cell phones free built the cellular phone business into what it is today.

If some outfit wants to take Microsoft's place as the software leader, what better way than by making their software free. That's a pretty powerful argument in a world where PC prices are dropping below $1000. But let's go further. Network computers are a nice idea except they need more bandwidth and generally cost more than they should. What is the correct price point for a breakthrough network computer? Free.

Free software instantly breaks Microsoft's monopoly. Free hardware breaks Intel's hegemony. Throw in free Internet service and it's a done deal. And the numbers really aren't that bad. The true cost of dialup Internet service is $5-6 per month or $66 per year. Linux is free, as is the web browser that runs on it. The actual cost of a $500 retail NC is maybe $250 — $125 per year based on a two year life expectancy. So the cost of providing free Internet service on free hardware running free software is less than $200 per year.

That's funny, Wall Street seems to think public ISPs are worth around $1000 per subscriber. By seducing customers with free stuff we've made 500 percent on our annual investment not to mention wiping the floor with Microsoft and Intel. Revenue comes in this case from advertising, electronic commerce and data mining. It's a tough job, but someone has to do it.

I know this is a simplistic business model that ignores total cost of ownership. Nothing is this easy, but it shows the power of free. Free rules, and Microsoft now knows it.