• This point, that unlicensed copying increases the network effect for Windows and helps to exclude competitors, has been noticed before. But in order to decide whether it has any effect on free software, you have to decide whether the point of the movement is to expand the use of the software, or to expand the demand for technological freedom. A user of free software who merely thinks of it as no-cost software, and who neither knows nor cares that it is free as in freedom, is not necessarily "helping the revolution." The fate of Windows and the fate of freedom are not photographic opposites of one another. Right now, Mr Jobs is grabbing eyeballs for a slimier version of "unfreedom developed at freedom's expense" as Windows contracts, which isn't getting us anything even as it subsidizes Mr Jobs' kingdom of ridiculously overpriced hardware.

• In fact, the short- and even medium-term direction of the software industry is less important to us than the long-term equilibrium, which is for software made by sharing because anarchist production of zero marginal cost functional goods is inherently superior. So we no longer have to ask about the fate of the software industry in late Stage One; in Stage Two of our progress, the proprietary industry dies off gradually, with entrenched high-quality proprietary incumbents like IBM and SAP taking much longer to abandon the model than entrenched low-quality incumbents, even of overwhelming size, like Microsoft. In the end, what advances our revolution is that not even Microsoft can avoid paying to distribute freedom.

• So what this essay needed was to go past the relatively easy insight that Microsoft sustains network effects through tacit encouragement of piracy, to something closer to a real analysis of the legal and social outgrowths of the free software movement. I have tried, at longer length using two extensive illustrations, to set out a possible approach.

A Free Software revolution is upon us. First the revolution attracted sophisticated users. Now Sourceforge.net, the largest community of open source programmers, has 180,000 open projects and over 1.9 million registered users. To complete the revolution, software freedom fighters must capture the unsophisticated user – what most call the average computer user (“ACU”). On that front, the revolution has pressed on, seeking higher rates of adoption by pre-installing Linux on Dell machines.

Despite these successes, some have wondered why Free Software isn't more prevalent: Why do ACUs continue to pay hundreds of dollars for Windows when Linux is free? Several explanations have been given, but one in particular – the effects of rampant piracy – has not received adequate attention.

Simply put, the widespread availability of “free”, pirated software impedes the Free Software revolution. To provide focus, I consider how pirated Windows impacts the adoption of Linux. Much of the same could be said, however, regarding the impact of pirated MS Office on OpenOffice.org.

According to Merriam Webster, one definition of “revolution” is “a changeover in use or preference especially in technology.” For the purposes of this paper, we define the Free Software revolution as the movement to convert users from proprietary software, such as Windows, to applications that respect a software's freedom, such as Linux. Accordingly, adoption of free software is critical for the revolution to be complete.

Indeed, the value of Linux increases—and the value of Windows decreases—as more users adopt Linux. This phenomenon is known as the network effect, which cemented Microsoft's power in the market. Now, it is crucial to turn the tide on Microsoft by increasing the Linux install-base.

But at this point we reach a barrier. Despite Windows costing at least $100, an ACU won't switch to Linux, which costs $0. Two problems are evident. First, Linux does not cost $0 if we account for intangible costs. Second, rampant piracy makes Windows effectively “free.” Given a choice, most people would rather have pirated Windows.

Though Linux is ostensibly free, it incurs intangible costs. For example, an ACU should account for the amount of time it takes re-learn the OS. For kids, this cost may be low, for busier people, this cost will likely be high. Furthermore, the ACU must find replacement programs for his Windows applications and re-learn them, too. Other hidden costs include finding the proper Linux distro, addressing interoperability issues, and encountering the ACU-feared command line. In other words, “(t)he cost of getting used to the new environment, as easy as it might be, is probably more tangible to (an ACU) than the money he technically should be spending but won't.”

On the other hand, Windows is effectively free after accounting for the risk of illegal activity. But an ACU, who probably downloads pirated music, is likely to value this risk at zero. Furthermore, even sub-average computer users who don't have access to the internet are likely to have access to pirated Windows – usually “through some guy they know.” Owing to the illegal nature of pirated software, perhaps we should also factor in the cost to the ACU's conscience – as little as that might be. In sum, pirated Windows is basically “free” and is highly desirable because the ACU is accustomed to it.

On balance, an ACU would risk downloading illegal software rather than spend time learning Linux. Of course, the analysis above assumes that the ACU values Windows at least, if not more than, Linux, and it assumes that there is a lower cost in downloading and installing pirated Windows than in installing and learning Linux. Both of these assumptions most likely withstand deeper scrutiny.

On a more macroeconomic level, “having these pirates means that Linux’s installed base does not grow as much as it would have if piracy weren’t there.” That is, software piracy bolsters network effects that add value to Windows. According to Ghemawat and Casadesus-Masanell, software piracy captures who users would not have bought Windows in the first place because it's too expensive. Thus, piracy converts the deadweight loss into a valuable asset by increasing the strength the network. Even Bill Gates “openly concede[d] that tolerating piracy turned out to be Microsoft's best long-term strategy,” stating that "It's easier for our software to compete with Linux when there's piracy than when there's not . . . .”

Ironically, software piracy hurts free software by hampering its adoption. Thus, the question becomes: How can Free Software fight back? Three solutions come to mind. First, freedom fighters can help Microsoft monitor piracy and enforce copyright law. Unfortunately, this solution is unlikely to reduce piracy by any appreciable amount. By analogy, piracy remains rampant in the music and movie industries despite increased enforcement efforts. Second, freedom fighters can embed viruses into pirated software. The idea is to “poison the well” – raising the cost of using pirated Windows such that Linux becomes a beneficial alternative. In addition to being malicious, this solution is unlikely to inhibit ACUs, as they feel protected by their anti-virus application. The third, most plausible option is for developers to make great Free Software that attracts the ACU more so than pirated Windows. Though some believed that Linux could compete against Windows based on pricing, this model is wrong. Due to the effects of piracy, Linux must out compete Windows pound-for-pound. Although this process has begun, more work is needed to refine Linux so that ACUs see it as a welcome alternative to Windows.