After coming under fire for its proposed settlement plan--released in November--that would give $1 billion in technology and cash to the nation's poorest schools, Microsoft sought to calm critics with a mid-December alternation.

Under the new proposal, which was still before a judge at

Microsoft's original plan came under attack almost immediately. On Nov. 26, the day before U.S. District Judge J. Frederick Motz was to begin hearing arguments on whether to accept or reject Microsoft's proposed settlement, the Computer and Communications Industry Association issued a critical letter to the court. "The settlement before you would inflict great harm upon the technology markets," writes Edward Black, the association's president and CEO. The proposed settlement would do nothing to deter further anti-competitive conduct, he adds. CCIA members include Sun, AOL, Quest, Verizon and Yahoo. Apple Computer CEO Steve Jobs issued a statement saying the proposed settlement would allow Microsoft to "make inroads into education, one of the few markets left where they don't have monopoly power." He adds that Apple has 50 percent of the education market share.

Still, Microsoft was praised by several school superintendents. "I've been fighting the digital divide for the last 10 years. It has always been two steps forward and two steps back. This new program is a phenomenal gift to all economically challenged children and families in America. It gives us a quantum leap forward in achieving technological equity," says Anthony Amato, school superintendent in Hartford, Conn.

Microsoft's proposed plan would provide $1 billion for training, support, hardware and software to as many as 12,500 schools, says CEO Steve Ballmer. Eligible schools are those with 70 percent of students receiving free or assisted lunch. About 14 percent of schools nationwide stand to receive something if the settlement is approved.

Microsoft plans to give schools "tens of millions of dollars" in software during a five-year period. Schools will also be entitled to a free upgrade during the five-year period, which starts when the plan is approved by the court. Microsoft, which was initially accused of overcharging for products, has no plan to reduce the cost of its software to the education market. "There is nothing in the settlement that relates to the price of our software," says Tom Burt, deputy general counsel. "In Microsoft's view, our software has always been very reasonably and competitively priced." Microsoft officers note that part of the money given to schools could be used to purchase any type of software, not only Microsoft products.

Red Hat, a company that produces software for Linux operating systems, offers an alternative plan. It will give schools free software indefinitely, allowing Microsoft to concentrate on giving schools hardware only. CEO Mat Szulik estimates that one million computers would make it into schools under his proposal, more than the estimated 200,000 that he believes would be given to schools under Microsoft's plan.

Other aspects of Microsoft's proposed plan include $150 million in seed money for technology spending and an additional $160 million for technology support programs to assist participating schools. The software company plans, as well, to give $90 million over a five-year period to train teachers, school administrators, and support personnel.

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