"This [the stoush over the news media code between Google and Facebook on one hand, and the Australian Government on the other] has made for an unusual split within the tech sector," Smith said in a long blog post published on Thursday US time.
"And we’ve heard from people asking whether Microsoft would support a similar proposal in the United States, Canada, the European Union, and other countries. The short answer is yes."
After Google threatened to pull its Search service from Australia if the news media code bill was passed into law in its current form, Australian Prime Minister Scott Morrison spoke to Smith and Microsoft chief executive Satya Nadella, to discuss whether Microsoft would be willing to plug the gap. The answer was overwhelmingly in the positive.
Smith described the current situation in the US following the insurrection of 6 January, tracing the challenge to democracy which he attributed in large part to disinformation being spread far and wide.
And, he argued, disinformation was about the only thing that people had recourse to due to the closure of many newspapers and the fact that thousands of journalists had been put out of work.
"Just as a chair needs four legs to remain sturdy, democracy has always relied on a free press to make it through difficult times," he said.
"Never free of controversy, an independent press has often inflamed differing opinions. But it has helped ensure that the public considered a common set of events and had a generalised understanding of common facts. In short, independent journalism is vital to the social cohesion that is essential for democracy."
Smith said since the year 2000, the revenue from US newsrooms had fallen by 70% while employment had dropped by half, with more than 2000 newspapers going out of business.
"As we know from our own experience with Microsoft’s Bing search service, access to fresh, broad and deep news coverage is critical to retaining strong user engagement," he said.
"This means that news content generates significant indirect value for search and social media sites – as much as $4.7 billion annually for Google, according to one recent study – even though people often do not click through to the original story.
"This means that news organisations go uncompensated even while all this traffic fuels platforms that have become profitable tech gatekeepers on which businesses must advertise to reach consumers."
Smith said Australia's response to the problem of digital platforms taking most of the online advertising market was "creative".
"First, they permit the news organisations to join for purposes of collective bargaining. And second, in the event of an impasse, they require the parties to appoint an arbitration panel that will engage in 'baseball arbitration' – an approach in which an arbitrator chooses one of the final offers made by the two sides."
Smith described the reaction of Google and Facebook to the news media code as "dramatic". "...and this is where we at Microsoft have entered the picture," he said. "Facebook said publicly that if the parliament passed the new law, it would stop Australian users from sharing news on its Facebook and Instagram platforms.
"Google went even further, stating repeatedly that, if the bill became law, it would pull its search service out of the country entirely.
"For Australians used to going to Google’s clean-looking search page to type in a query, under the search bar they found a link to a video explaining that, if they wanted to continue to use the service, their government would have to back down."
He said Google and Facebook had objected to two aspects of the bill. "First, [they] object to the fact that they are singled out by name in the Australian legislation. It’s not an approach that would be used in the United States and, in fact, it’s easy enough to redress.
"For example, the obligations described above could easily be written to apply to any search business that has more than 20% market share in Australia. At Microsoft, we are fully prepared to aim for this search share and become subject to the law’s obligations the day we do."
Smith said Google was objecting strenuously to what it regarded as the injustice of having to engage in baseball arbitration. "It argues that this type of arbitration is appropriate only 'when the parties are already close in price'.
"In contrast, according to Google, there is a wide gap between what news organisations are seeking and what Google is prepared to pay. Ignoring the fact that an imbalanced bargaining position has created this disparity in the first place, Google, in effect, asserts that its own inflexibility at the negotiating table means that it should not have to participate in an arbitration that rewards reasonableness over intransigence."
He said Google had implied that, if there was to be any arbitration, it should follow a more traditional process that involved multiple submissions by lawyers and focused on the fair market value of the news content rather than the benefits the tech gatekeepers derive from the inclusion of that content on their services.
"But a slow and legalistic process clearly would benefit those with deep pockets, rather than the smaller parties that need the help," Smith pointed out. "At the end of the day, what is wrong with compensating independent news organisations for the benefits the tech gatekeepers derive from this content?"
An Australian Senate committee is not expected to make any changes to the bill before sending it back to Treasurer Josh Frydenberg later today. The bill is expected to be debated in Parliament over the next two weeks.