Microsoft envisions a future with computing as pervasive as air, and it sees itself as the oxygen.

The question is: Will the rest of the world buy what Microsoft plans to bottle and sell?

To breathe in the electronic environment of Microsoft's .Net imaginings, consumers must first hand their private information over to Microsoft, and trust the Redmond company to store it securely and parcel it out judiciously.

Some think it's an impossible goal for a company with already questionable records on trust, privacy and security. But its success is crucial to Microsoft, which is banking its future on its .Net initiative.

"This particular kind of service would require the most trusted vendor," said Rob Enderle, vice president and research leader at Giga Information Group, and one of the leading analysts on Microsoft. "Microsoft is not well-trusted, and recent security exposures have many concluding that it is not well-protected either."

Microsoft has long wrestled with hackers breaking into the company's sprawl of networks, undermining trust in its ability to safeguard private information. And the company's public image, which for years has struggled with Big Brother and Evil Empire comparisons by its many critics, was further tarnished during the epic antitrust trial between the company and the Department of Justice.

Now, with the recent unveiling of HailStorm--which will be a major component of the .Net vision--Microsoft is asking the public to fork over their most personal information, like address books, calendars and credit-card numbers. It promises to hide that information from the World Wide Web outside of Microsoft if the customer desires anonymity. At the same time, however, it is cautioning lawmakers on Capitol Hill against passing new laws that would guarantee Netizens the right to such privacy.

Critics charge that Microsoft specifically--as well as any one company in general--should not be trusted with such a deep pool of personal information. To date, Microsoft has repeatedly failed to stop hackers, and the richer, more vast reservoir of information envisioned by the company would represent a particularly choice target for digital crooks and online merchants desperate for consumer data. With its address books, calendars and purchase history, the database would also represent a particularly detailed data jackpot for law enforcement officials. And Microsoft's failure to endorse even the idea of federal legislation, critics say, raises questions about the company's commitment to consumer privacy.

But Microsoft officials counter that the HailStorm architecture is revolutionary in that it for the first time gives users choices over how--or whether--their personal information will be used on the Web. The .Net project, they say, advances consumer privacy instead of eroding it, and it does a better job of protecting consumers than any law.

"Privacy is a personal value that each individual has a different approach to," said Richard Purcell, Microsoft's chief privacy officer. "HailStorm will not say there is a one-size-fits-all privacy policy. It will have the flexibility to say the user is in control.

"We are assuring people that there is a basis for controlled consent," he added. "A very major information campaign has to be mounted."

But analysts and privacy advocates aren't so sure.

"Public relations alone won't do it," said Chris LeTocq, research director at Gartner Group. "They have to be able to say, you know, 'Here are these third parties that are going to audit us, here are concrete offerings which are going to somehow convince people we are somebody to be trusted.' Given the negative publicity they have gotten from the Department of Justice suit, they have a long way to go."

The .Net initiative, LeTocq said, represents Microsoft's attempt to "recast the Net as they wish it had been written in the first place. From Microsoft's perspective, the Net is far too much of an egalitarian structure for them to make money. What you are seeing here is Microsoft rewriting the Net to look like Windows."

Among other things, for .Net to work, Microsoft will have to be willing to work closely and openly with the bulk of the online commercial world.

But Microsoft "does not have a history of egalitarian partnering," said Frank Prince, senior analyst in e-business infrastructure at Forrester Research. "People can apply to Microsoft a joke that they used to apply to IBM: IBM + X = IBM."

Hellstorm brewing

To understand the controversy surrounding hailstorm, it's necessary to grasp Microsoft's .Net vision of the future.

The goal of .Net--besides profit--is to coax personal computing away from the desktop and encourage it to happen anywhere, everywhere, from cell phones to televisions, watches to cars. The computing is to happen in the background, without a person sitting in a room staring at a screen and pecking at a keyboard. The crux of all of this behind-the-scenes communication is a platform permitting machines to talk with one another.

If Microsoft has its way, .Net will be that platform. Announced last summer, the services are being built on self-contained applications that can be anything from a simple request to send data from point A to point B to complicated business processes.

The Web services, Microsoft says, are intended to serve as software building blocks that may be used by other applications or called upon and combined with other Web services. Instead of writing those building blocks themselves, developers can save time and trouble by licensing them from Microsoft and other .Net developers. The glue that binds these building blocks is eXtensible Markup Language (XML), a "meta language" developed through the World Wide Web Consortium for sharing data and exchanging messages across programming languages, computing platforms and devices.

The easiest way to understand how XML Web services work, Microsoft says, is to compare them to Lego blocks; just like Lego blocks are designed to snap together, so will Web services using XML. "When you snap together XML Web services, you build a software solution that performs a particular task," Microsoft wrote in a White Paper describing .Net. "And just as you can use the same Lego blocks as part of many different objects, you can use a single XML Web service in many different groups, as part of the solution to many different tasks."

In March, Bill Gates announced a set of .Net Web services that he said are designed to provide compelling new ways for consumers to manage their personal information. Code-named HailStorm, these Web services will store personal data in so-called "schemas" that can be accessed by Web sites and services on "behalf" of consumers. Among the schemas already trademarked by Microsoft are myCalendar, myContacts, myDocuments, myNotifications, myProfile and myWallet.

The idea, Gates said, is that consumers store their personal information once. That information can then be accessed by Web services and sites--as long as the consumer has given permission. A customer purchasing an airline ticket on Expedia's Web site, for instance, could allow the HailStorm-certified travel service to automatically check his or her calendar to determine the best flight times. The customer could also grant Expedia access to his or her notification preferences so the travel service can alert him or her--via email, instant messenger, cell phone, personal digital assistant or pager--if the flight is delayed.

Or a HailStorm-certified Web music service could notify a consumer--again based on stored preferences about favourite bands, concert venues and seating preferences--when concert tickets to a local event go on sale.

"On the Internet today, one of the problems we're addressing here is that as you interact with these different sites, as you give out your postcode or your preferences or as you work with [numerous] devices... there's all this disconnection taking place," Gates said during HailStorm's introduction at Microsoft headquarters last month. "Stitching these islands together is about having a standard schema--in fact, a very rich schema--where all this information is stored, and letting all the applications and devices have access to the degree you give them permission to use and update that information."

But there's a caveat. "This whole vision of having multiple devices can only work if, magically, behind the scenes, the information is moving between those devices without the user having to get directly involved," Gates said.

It's this little detail that has alarmed so many analysts and privacy advocates.

Gatekeeper of your personal data

For Microsoft's .Net "magic" to work, consumer data needs to be stored centrally so it can be accessed by all the HailStorm-certified Web services. Microsoft casts itself as the gatekeeper for all that consumer data, saying it will store personal information for a monthly subscription fee at HailStorm data centres it plans to operate.

"Microsoft holds all the data: That's part of operating the service platform," said Ruth Anne Lorenzen, director of division marketing for .Net. It's only with the data residing in the "cloud" at HailStorm data centres, she said, that the .Net vision can work. She acknowledged that numerous issues regarding how consumer permissions will be handled have yet to be addressed. For instance, how will consumers know if the site to which they are handing over data has a stringent privacy policy and offers high-level security?

The only thing that seems certain is that anyone who plays in the HailStorm world will have to sign on to a Microsoft licensing agreement.

"People who call the HailStorm platform--site operators, developers--will have to have a license relationship with us and have to be certified," Lorenzen said. "They will have to have architected their solution in a way that meets" Microsoft's privacy and security standards.

But industry analysts, privacy experts and even some Microsoft supporters question whether Microsoft is capable of offering privacy guarantees, given the lack of any clear-cut laws surrounding privacy and the company's own antiprivacy legislation stance.

"Why are they being hypocritical?" asked John McCarthy, a group director at Forrester and a privacy expert. "They themselves are waving the flag for privacy, 'We're good citizens, we treat everyone with respect.' Yet they have joined the industry alliance to slow down privacy legislation. That strikes me as hypocritical."

Purcell would not say whether the company would support legislation, offering only that it would never back "bad legislation."

"This is really, really hard stuff--there can be strong, unintended consequences," Purcell said. "Law tries to nail this down and build a box around it so it doesn't move that much. We don't feel that friendly towards any effort that will try to halt or contain innovations."

Meanwhile, Microsoft's chief rival juggernaut, America Online, does support baseline federal legislation girding privacy.

Online players should be backing legislation, said Ari Schwartz, a senior policy analyst at the Centre for Democracy and Technology, a civil liberties organisation that last year received a US$150,000 contribution from Microsoft. A good law, he said, could turn into a distinct advantage for cyberspace.

"Instead of putting it in terms of, 'Regulation will bog down the Internet,' " Schwartz said, a good law would allow online companies to say: "Your privacy is protected more on the Internet than offline. You should shop online because you have the basis in law to know you are protected."

Besides questioning Microsoft's position on legislation, privacy and security experts also ask whether the company can create the highly secure environment needed to be the gatekeeper of consumers' data--and if the idea of having any one company serve as the steward of personal information for online users is a good idea at all.

"I, personally, would not buy into that kind of service," said Bob Lewin, president and CEO of Truste, a 4-year-old organisation that grants its seal of approval to sites that disclose their data collection practices. Microsoft is a "premier" sponsor of Truste, contributing US$100,000 per year to its operation.

Although Lewin believes Microsoft has been responsive to consumer complaints over its privacy and security problems, the idea of creating a single online repository for personal data has too many risks. "I believe in distributed knowledge, for want of a better term," Lewin said. "When you collect material like that--whether it's a Microsoft or someone else--no matter how well you protect it, there's always ways to get into it. And if you put it into one spot, once you get in there, you've got keys to the kingdom.

Some people might feel the types of services made possible by .Net are "convenient," Lewin said, "but the price for the convenience is the risk. It really boils down to convenience and the level of risk they're willing to take. From our point of view, putting it all together is not the best idea."

With a centralised database, "there is no way you can be 100 percent sure this data will not get away from you. It's an accident waiting to happen," said Deborah Pierce, a staff attorney specialising in privacy at the Electronic Frontier Foundation.

"I think this is really awful," she said. "This is all of your personal information. You might have doctor's appointments, prescriptions you take. It could subject the consumer to all sorts of problems if it got out, from identify theft to job discrimination. I think it's a bad idea."

Others worry that governments could easily gain access to the vast concentration of personal information.

"They advertise [.Net] as one-stop shopping for the consumer, but it could turn into one-stop shopping for the cops," said Peter Swire, the Clinton administration's privacy czar, who now is a law professor. "The Fourth Amendment was designed to protect your home and your papers and effects. Your papers and effects used to be locked in your homes. What HailStorm does is put all of your papers and effects in somebody else's hands. The Fourth Amendment does not apply to records you have given to somebody else."

Fourth Amendment jurisprudence "starts from the proposition that if you trust information to a third party, you have lost control of it," said Stewart Baker, the former general counsel at the National Security Agency who is partner at law firm Steptoe & Johnson.

While the status of Fourth Amendment law in cyberspace is in its infancy and is constantly being tested, Baker predicted that in the end, "what the courts are likely to say in most of these cases is if you trust somebody else, you have to put your fate in their hands. If you wanted to protect all of the information people were storing on Microsoft's servers as though it were the hard drive of the user, it would require new legislation. Even Microsoft can't give you an assurance."

Microsoft's Purcell said the company is aware of the Fourth Amendment implications for .Net. There are "lots of interesting legal questions around this," he said, noting that Microsoft executives are "engaged with the government in discussions" around the Fourth Amendment and cyberspace.

Trust or bust

For its part, Microsoft maintains that HailStorm turns the issue of online privacy on its head.

"We're putting the emphasis and focus on the user and saying that the information that the user has--the information that the user is storing and retrieving and using together with HailStorm--that information is there, it's under their control, they own it, they decide who to give it out to," Bob Muglia, group vice president for .Net services, said at HailStorm's introduction. "Microsoft may run a server, but we don't own the data. We're making a commitment to the industry, a commitment to users that that data belongs to the user and we won't use it any way that they haven't authorised. We won't mine the data. We won't sell it. We won't publish it. And we won't use HailStorm information to target users with advertisements and banners and things like that."

But Microsoft is the first to admit it has serious hurdles to clear.

Running service systems and fixating on their operational excellence "is not something that Microsoft has always had in the core of our genes. This is something that's relatively new to us," Muglia said, acknowledging the hacker attacks and outages that in recent months have plagued Microsoft-owned Web sites, including its Hotmail free email service and the main Microsoft.com site.

"There is just no doubt that having Microsoft viewed as a company that can provide operational excellence is critical to our shift to software as a service," Muglia added.

Purcell added that Microsoft "would own the infrastructure by which that data is managed by contract," reiterating that Microsoft would not "own" users' data. "Because this is a fee-based system, the data is managed by the individual. How many copies of your information are transferred by different service providers today? One of the ways we shift the paradigm is that we become your data management concern, so you only have to change your data one time," he said.

Although he thinks the technology promises of .Net are "impressive," Giga's Enderle is skeptical that Microsoft will be the company to bring HailStorm services to market because of what he sees as a "lack of trust" in the company. In annual surveys of technology influencers, Giga said Microsoft has been identified as the least trusted vendor since Giga began doing the surveys in 1997.

Another problem, Enderle said, is that Microsoft is already viewed as a "taxing entity" because of a number of its pricing actions, including the elimination of its concurrent-use and work-at-home programs and the elimination of the Windows 9x line in favour of what he said are the "vastly more expensive" NT-based products for mainstream business.

"These actions and the lack of viable choices for Microsoft customers created the belief that while initially Microsoft might price to value--i.e., create a bargain--once you were dependent on the service, Microsoft would raise the price to what the installed base would bear," Enderle wrote in an April 3 analysis of HailStorm. "There is an existing belief that what Microsoft charges for its products is akin to a tax, and a monthly charge to retain one's own data would likely add to that belief."

Then there's the recent debacle over Passport, Microsoft's user authentication service.

Oops!

"We're not asking people to trust us on HailStorm promises on faith, but on how we act," Purcell said.

But if actions speak louder than words, Microsoft is off to a bad start that can be summarised in one word: Passport.

Today, consumers of Microsoft's Hotmail must use Passport to log on to the email service, with Passport storing their user name and password. Microsoft said there are approximately 100 million "active" users of Passport, though the company said it has set up more than 160 million Passport accounts. Consumers can also use Passport's wallet to make purchases at more than 70 sites, including 1-800-Flowers.com and RadioShack.com.

Passport is central to HailStorm, holding the key that will unlock consumers' HailStorm data.

"You provide the Passport, and then your schema is available to you," Gates said, acknowledging that Microsoft is banking on persuading current Passport users to sign on to HailStorm services. "It's our goal to have virtually everybody who uses the Internet to have one of these Passport connections."

But within days of Gates' comments, Microsoft was criticised for what users called Passport's draconian terms of use, taking issue with language that stated by "inputting data . . . or engaging in any other form of communication with or through the Passport Web site"--or any of its "associated services"--you grant Microsoft the rights to "use, modify, copy, distribute, transmit, publicly display, publicly perform, reproduce, publish, sublicense, create derivative works from, transfer or sell any such communication."

Microsoft said the language was outdated, with Lorenzen noting that the company had "missed that section" of the document when it revised Passport's terms of use. "I cannot apologise enough to anyone who saw it," she said.

The EFF's Pierce found Microsoft's blunder troubling. "This is another reason why I'm sceptical that they can pull all of this together and make a product I would trust to use," she said. "How do you overlook this privacy policy? It was, what, 2 years old? I would have thought it would have been one of the first things they would have done, something that the chief privacy officer would coordinate. This is a big deal. If they can't even take the time and care to make sure their privacy policy is up to date, how can we be sure they will take the time and care to make sure all of our personal data is secure?"

No slam dunk

While American Express was one of a handful of partners on hand at Microsoft headquarters last month to show its support for HailStorm--and how customers of its "Blue" card could have access to instant messaging and notification services concerning their account--the company said its enthusiasm for .Net remains just that, for now.

"We're excited about the possibilities of .Net," said Molly Faust, vice president of corporate finance communications at American Express. "We're looking at lots of new and emerging technologies that can deliver benefits to our customers. But we would only deliver those benefits if the privacy and security of our customers is maintained and assured."

Since so many details concerning HailStorm are not yet finalised, "what we showed is the possibility of services we could deliver, not what we will deliver," Faust said.

If Microsoft's HailStorm platform didn't meet American Express' privacy and security standards, "we wouldn't follow through," she said. "They're not standards, they're requirements . . . When we're working with partners and vendors, we need to ensure that their privacy practices are up to our requirements."

Another partner, eBay, said the privacy and security of its customers is also a priority, but it remains confident Microsoft will deliver on its HailStorm promises. The online auction site hopes to use HailStorm services to provide its customers with real-time tracking of their bids without requiring them to be logged on to eBay's Web site.

"We have a long history with Microsoft," said eBay spokesman Kevin Pursglove, noting that Microsoft operates the front end of eBay's auction service. "I think we're both on the same page in terms of where eBay wants to be in terms of privacy and security. And our past record with Microsoft... is that you always find that where there's a will, there's a way. If the priority and objectives are set, and if the interest in reaching them is high enough, then we will make it work."

There's certainly a will--Microsoft is betting the company on .Net. As for the way, Microsoft's route remains unclear, littered with obstacles, tortuous.

And while company executives say they believe the journey will lead to pots of gold, others hope the trek to .Net becomes so painful and confused that the company strikes out for riches elsewhere.

Microsoft "wants to be like a government," said privacy advocate Jason Catlett, president of Junkbusters. "They want to issue passports and levy tolls and control identity. But they just aren't a trustworthy government in the eyes of most people... If they want to be the consumer identity broker and toll collector, then privacy and consumer trust are going to be the biggest points of resilience for them."

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