No More Free Lunch


William Dan Terry
Director of Technology
NetPubs International

IP News (Internet Edition)Winter 1997

Talk given at the Association of American Publishers, Inc.
"Access to Online Products: Pay to Play... Pay to Stay" seminar

6 March 1997

Section titles and numbers are used for organization and were not used in the presentation.

1. Intro

Slide 0

I'm one of those people whose had an inside vantage point on the developments of the Internet. You know, the small group who didn't fit into the company, but were housed in an off corner of the building and given large amounts of internal R&D money and only brought out for dog and pony shows. From this perspective I've gotten to witness some radical changes in how the Internet is used.

Slide 1

In this talk I'm going to cover two areas which are part of paid online products: Internet culture past and present - where it came from, who was on it, who is on it now, where it's going, and changing the misconception; and the options available for implementing paid online products in the areas of access control, payment options and property protection.

2. Net Culture Past and Present

2.1 Where it came from

Slide 2

Many people are familiar with the story of the origin of the Internet: some unrelated US Govt. programs which ended up being put together, collaborative and contributive enhancements from the participating community. A giant computer science project which also connected scientists and researchers from other fields who found it useful. Information sciences started playing in the game, experimenting and developing. All sorts of resources were being made available worldwide for free. In this culture the emphasis was the free exchange of information.

Probably one of the most recognized names of the Internet is Tim Berners-Lee. Working at the European Laboratory for Particle Physics, Berners-Lee envisioned a means for sharing information in a way more friendly and visual than the more traditional Internet protocols like this.

Slide 3

From this vision was born the World Wide Web, probably the most significant cause of the popularization of the Internet. It took the Internet from the techie realm to the casual personal computer user realm.

2.2 Who was on it

Slide 4

Before the Net's popularization, the netizens were largely from the research arenas. People involved in computer, networking and communications research, physicists, librarians and other information specialists. To them the Internet was a tool for researching communications, computer, and information technologies and a tool with which to exchange other research information. Corporations were starting to exploit a few of the communications protocols, like email, as business tools, but this was a small part of the Internet culture as they were not large contributors to shaping the Net.

2.3 Who is on it now

Slide 5

With the Net's popularization, the netizenry changed. Many of the new people were not associated with the more traditional Internet fields and came from diverse backgrounds like publishers, florists and pizza makers. Many were attracted by the novelty of world communications, the amusement provided by some of the material on the Net, and the promise of the largest collection of free resources available at one's fingertips.

Businesses started to explore the commercial benefits that might be reaped from such a global tool.

2.4 Where it's going

With this wealth of material available, ease of use, and the part of human nature which tingles at the thought of a free lunch the Internet became a celebrity; magazine covers, news headlines, court appearances.

2.5 Changing the perception

Slide 6

Much of the hype surrounding the Internet focused on these free resources. What is often overlooked or not clearly understood by these new denizens of the Net is that the creation of all of this material did cost. Research grants, student projects, and volunteer efforts made it happen. These don't and can't create all of the material people need or want. Commercial entities fill the void as they traditionally have. The media may be different, but the overall economics of information aren't.

The new Internet is experiencing a culture shock. A culture shock which is often blamed on commercial entities "trying to make a profit on the Net", but which is really the result of a shift in the burden of the cost of the resources.

Slide 7

The first step in making paid online products work is to educate the public and correct the misconception that the Internet was the home of free resources. The public needs to understand that:

  1. Internet content was never free. It's just that people rarely saw the bill.
  2. The creation of content has always cost. If the people want quality content, they must be willing to pay for it.

3. Paid Online Products

Public acceptance of paid online products isn't the only thing needed to make it work. Commercial use of the Internet is a new area; one with many options, but no experience or history to provide guidance. We are the adventurers in this odyssey.

Slide 8

Paid online products rely on three aspects of a program: access control, payment methods, and property protection. The options chosen for each aspect must work in concert with the others. Some combinations create a strong program and others are self-defeating.

3.1 Access Control

Slide 9

Access control is the means by which availability of the product is managed. Nothing precludes using different access control options for different products. In fact, this will probably be desirable in order to satisfy the variety of customers you can service online.

Access control models can roughly be grouped into four types: candy store, membership, subscription and open access. Variations of these can also be implemented.

3.1.1 Candy Store System

Slide 10

The candy store system is a simple per item or per access system. Walk into the store. Make your selections from the jars. Pay for them. The customer pays for each individual product or each individual access to the service.

Such access can be implemented in a variety of ways including pay as you go for each item, prepaid allotments against which individual items or accesses are debited, or periodic billing.

3.1.2 Membership System

Slide 11

The membership system, like a membership to a club, allows the customer access to all of the defined resources for the period of time of the membership.

For instance, membership access to an e-journal can allow the customer to not only read the issues produced during the time of the membership, but to also peruse the back issues. When the membership time is expired, access to everything is disallowed.

3.1.3 Subscription System

Slide 12

The subscription system is similar to the current subscription system for hardcopy material. The customer essentially pre-purchases a set of issues to be accessed as they are made available. Other items or services may be part of the package, but only those that are current to the subscription period.

3.1.4 Open Access System

Slide 13

The open access system is historically what was done on the Internet and is still the norm for software. Such software for which there is a purchase price is known as shareware. Regular shareware includes a license for use, generally involving a free trial period, after which the user is supposed to be honest and send payment. The premise is that someone produced the software and if enough people like it and send money that someone will continue to enhance the software and provide better versions.

Some shareware comes in variations such as crippleware, which stops working after the free trail period or only work so many times, and nagware, which reminds the user to pay every time the software is used.

While shareware currently applies to software, placing journals and other material inside special software capsules may provide a viable option. When given a valid registration number the software would allow the use of the material. Information viewers which adhere to access rules which are embedded of the information may provide another option.

3.2 Options for Paying

Slide 14

Robust, universal payment methods are lagging other aspects of the Internet since such needs are new. A number of options are currently available and others are under development and testing.

Direct online payment options on the international scale will be limited as long as strong encryption is not universally available.

3.2.1 Traditional

Slide 15

Traditional methods such as faxed or phone credit card payments, invoices, and checks via snail mail are all tried and true means for collecting payments. They will eventually phase out of use on the Internet, but until better universally operational methods are in place, they will be with us.

One new twist in Internet payments is the use of commerce Web servers which offer encrypted transfer of credit card information. These are a useful step forward, but there is no standard, not all customers have Web browsers which are compatible with other brands of commerce Web servers, and most importantly the encryption for non-US versions of US commerce Web server products is not strong enough for true protection.

Some online businesses use credit cards online without encryption. While the customer has limited liability for stolen credit card numbers now, sending the number over the Internet unsecured is similar to leaving the card on a lamp post. The opportunity for fraudulent use is greatly increased and may have adverse repercussions in the industry which will in turn affect the consumer.

Some credit card companies are addressing this last concern by providing card holders with Internet credit card number aliases associated with a regular card number. The alias number is used on the Internet instead of the regular card number, and it is not valid for non-Internet transactions.

3.2.2 Online payment systems

Slide 16

Online payment systems come in two basic forms: information and service brokers, and payment clearing houses. Information and service brokers provide a comprehensive online system in which vendors provide their wares and the broker handles payment collection from the customer and disbursal to the vendor.

Payment clearing houses are third party entities which only come into the picture when the transaction is being made. They provide an online means of passing credit card information, usually via special software, and disburse the vendor payment via standard, non-Internet banking channels.

3.2.3 Digital cash

Slide 17

Digital cash is the use of encryption technology to create unique, identifiable pieces of text which can be used like paper money. It is based upon its acceptance and good faith in the institutions which process the exchanges between digital cash and currently accepted "real" cash. If implemented well, it should be harder to forfeit than paper money.

Denominations of digital cash can be created which provide sensible recompense for even the smallest bits of information, like a quarter penny for a news flash. Payments would be made just as cash is currently used, by putting together the right combinations of currency to add up to the selling price.

3.2.4 Digital bank notes

Slide 18

Digital bank notes use the same technology as digital cash. However, like paper bank notes, digital bank notes are issued for requested amounts and used for one transaction.

3.3 Property Protection

Slide 19

The third piece required to make paid online products work is the protection of the product itself. This entails both protecting the integrity of the product and protecting against copyright infringement.

3.3.1 Content Integrity

Slide 20

The protection of content integrity is needed to maintain the verity of the material. How important this is depends upon the importance of the material and its likelihood of being altered and presented. The severity of the problem is greater in the Internet age. The effort required to alter a page in a printed publication and pass it off as genuine is much greater than that required to alter electronic information, such as a Web page.

Particularly for material which is used in preparing other material, being able to rely on its veracity is important.

3.3.2 Copy Protection

Slide 21

Copyright infringement in the Internet age needs to be readdressed. A combination of strong international law and enforcement is required… as well as a way to make honesty pay. The trick may be to make the cost of material and ease of payment quite small when compared to the consequences of being caught infringing copyright.

When personal computers were first out they cost a pretty penny. And purchasing the software to run on them required a second mortgage. The main computer software companies were charging many hundreds of dollars for compilers (used for programming). A lot of this software was copied and used as the costs were too high to buy it. A little company called Borland, came out with compilers which were just as capable for under $100. Their business bloomed and what they didn't get in price they got in volume.

Other methods of copyright protection may be created as digital copyright protection is explored, such as software capsules which don't allow for copying. Or embedded magic tokens which allow the information only to be used digitally on the registered owners equipment.

4. Recap

Slide 22

Paid online products are going to be a large part of future commerce. To make it work is going to require the education of the consumers, development of online technologies, and international policies and agreements on many issues. These all are going to require active participation as the Internet arena develops at a fast pace. New developments bring new options and new dilemmas requiring creative solutions.

Reeducating the public to eliminate the sticker shock is the first step in making paid online products work. From there a coherent program for implementing a paid online product service needs to be constructed from the options for access control, payment methods, and product protection.

And most importantly, Internet developments need to be followed closely and the paid online product program needs to be continually evaluated and revised in light of these developments.

IP News Winter 1997 Table of Contents IP News Title Page©1997, NetPubs International

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