Software giant Microsoft Corp. will give more than $1 billion in cash, software, training, and computer hardware to thousands of the nation’s poorest schools during the next five years, under a tentative agreement to settle more than 100 class-action lawsuits that alleged Microsoft products were overpriced.

The agreement was submitted to the Federal District Court of Maryland Nov. 20 and is awaiting approval by U.S. District Judge J. Frederick Motz in Baltimore, who is overseeing the class-action suits.

If accepted, the settlement will provide cash, computer hardware, software, technical assistance, and training to all qualifying schools—those with 70 percent or more of their students receiving free or reduced-priced lunches, or about 14 percent of all schools, according to company estimates.

“It is a settlement that avoids long and costly litigation for the company and, at the same time, I think really makes a difference in the lives of millions of school children in some of the most economically disadvantaged schools in the country,” said Microsoft’s chief executive officer, Steve Ballmer.

Microsoft was hit with a host of private lawsuits claiming antitrust violations after the government filed its antitrust suit against the software company in 1998. Many states dismissed the suits because new computer buyers did not buy the Windows operating system directly. The remaining cases were consolidated under Motz.

Michael Hausfeld, representing a group of private plaintiffs in Washington, D.C., said he originally thought of the unorthodox settlement idea about nine months ago after realizing that each of the 65 million computer buyers eligible to gain from the settlement would likely receive only about $10 if they won the case or a settlement were reached.

Terms of the settlement

With $150 million in seed money, Microsoft said it will create the National eLearning Foundation to offer grants to underserved schools for purchasing computers and software. The foundation also will spend $100 million to establish sustainable programs to support technology in schools.

In addition, the foundation will oversee another $160 million to be used for technology support programs to assist participating schools.

Eligible schools can request a standard subscription to Microsoft’s TechNet technical support program, which includes Microsoft resource kits, service packs, technical information, training materials, and technical training CDs.

Microsoft will give up to $90 million to train teachers, school administrators, and support personnel to integrate technology.

Furthermore, the company will give at least 200,000 software licenses to nonprofit computer refurbishing organizations so they can install Microsoft operating systems on refurbished personal computers. Eligible schools could apply for grants that would reduce the price of these refurbished machines to $50 each, Microsoft said.

During the five-year period, eligible schools will be able to request a wide range of educational and productivity software at special prices for both PCs and Macs.

The products included in this offer are Office XP, Office 2000, Office 2001 for the Mac, Windows XP Professional, any Scholastic Magic School Bus title, any My Personal Tutor title, one Windows 2000 server and client access license, and one Encarta Class Server and access license.

Educators’ reaction

Many educators are pleased that this unusual settlement will benefit needy schools.

“In light of the years of prospective litigation that these suits would have caused, I am pleased that the parties chose to settle, and in a fashion that will help the neediest of America’s schools,” said Rick Bauer, chief information officer at the Hill School in Pottstown, Pa.

“The scope and direction of the relief is both comprehensive and fair,” he said, adding that it “sounds like a win-win to me.”

“This settlement has great potential to help school districts—like Western Heights—that have invested heavily in technology infrastructure,” said Joe Kitchens, superintendent of Western Heights School District in Oklahoma.

“As … a district that serves a high number of economically disadvantaged students, our district is always challenged to find the resources to upgrade technologies and train staff to use acquired applications,” he added.

While most educators seem satisfied that the settlement will help poor schools acquire software and train teachers to integrate technology into the classroom, some say it still doesn’t address Microsoft’s high prices.

“Nothing in the decision addresses Microsoft’s pricing schemes that are outrageous at best,” said Ken Eastwood, assistant superintendent for instruction and technology at New York’s Oswego City School District. “The suggested solution is not really a solution, but a political attempt to sweep the issue under the rug.”

According to Eastwood, Microsoft’s new educational licensing prices are so high that his district, which was featured in Microsoft case studies, is no longer able to afford Microsoft products and is turning to free alternatives like Star Office and Linux as potential solutions.

As for donated computers to schools, Eastwood said, “That is just passing on problems to the schools.”

Others worry that the program’s eligibility requirements aren’t a true indicator of need—and the program therefore won’t impact the schools with the greatest need.

“This seems like a creative way to settle a lawsuit,” said Dennis Dempsey, superintendent of Crook Deschutes Education Service District in Oregon. “Unfortunately, using free and reduced lunch as a qualifier does not mean that all the poor schools in the country will get the help that will be provided by this settlement.

“There are many small schools, especially one-room schools, in the western United States that do not operate free and reduced lunch programs because it is not cost-effective to do so. Thus, a very poor small school would not qualify for the help provided by the settlement, which would be unfortunate.”

Norris E. Dickard, senior associate at the Benton Foundation, which focuses on digital divide issues, agrees.

“Since other major federal investments already give priority to schools with large numbers of students in poverty, it will be important that the resources go to the schools that really need them—the ‘last mile’ schools where students still do not have connected PCs in the classroom,” Dickard said.

“One billion dollars over five years is small compared to other investments—the eRate is $2.25 billion a year—but it is certainly a positive sign that the deal seeks to benefit schools and other organizations that serve needy students,” Dickard said.

The program would operate in addition to Microsoft’s other charitable efforts. _________________________________

Material from the Associated Press was used in this report.

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