Share this article

print logo

SOMEBODY HAS TO PICK UP THE TAB

Q: Some online companies want to charge a use fee or transaction fee for information. I think this is wrong. Public libraries don't charge you to read a book. Do you think the Internet is headed toward transaction fees?

A: The Internet resembles a library in some respects and a bookstore in others. Not all information and services can be free, because few talented people, entrepreneurs or companies will offer high-quality work without hope for compensation.

A certain amount of content will be given away, especially in the Internet's early years, but there won't be a vibrant, long-term marketplace unless people make a living.

Of course, many "free" services on and off the Web aren't really free. Taxpayers finance libraries that buy the books they lend. Advertisers subsidize content on Web sites and television (and even in newspapers). Merchants pay credit card companies a percentage of the value of each financial transaction -- a "vig," in the parlance of the bookie.

Payment may come in the form of advertising, subscriptions for blocks of content (such as the online edition of the Wall Street Journal), fees for software licenses or pay-per-view fees. Consumers will decide, through their purchasing decisions, what they'll pay for and how.

Some network operators and other companies think they'll devise ways to secure a vig on every transaction that passes through their systems.

They're wrong. The Internet will remain too open and competitive for that to happen. You will be able to go to any Web site and complete a transaction -- such as purchasing life insurance -- without paying a percentage to the network operator or software supplier.

No company is going to get an automatic cut of transactions, and those that try will find themselves quickly excluded, as buyers and sellers find other ways to use the Internet to conduct commerce.

One of the wonders of the Internet is that transaction costs are inherently low. My colleague Nathan Myhrvold suggested in a prescient 1993 memo that the "information highway," now the Internet, would "become the ultimate market maker for goods and services" and drive down the costs of transacting business.

Myhrvold pointed out that most of today's financial systems have hidden costs. He asked why so many humans play the role of middlemen, and why their vigs are so large.

Myhrvold concluded that the interactive network would help consumers by eliminating most opportunities for vigs.

"Specific markets on the (information) highway may still charge a vig," he said, "but in general it will be smaller than anything charged today."

In a later interview, Myhrvold speculated on whether any company would figure out a sustainable way to pocket a cut of every transaction. It is unlikely, he said, because the efficiency and openness of the Internet favor consumers.

Ironically, Myhrvold's speculations have been cited by some of our competitors as evidence that Microsoft intends to charge a vig for transactions that rely on Windows software or the company's online service. Now some journalists have started repeating this.

Don't worry. Nobody is going to get a cut of any and all transactions. On the other hand, there's no question that every company doing business on the Web has to find ways to make a profit.

Plenty of companies will offer services for which customers are willing to pay. More than a dozen electronic travel agencies have sprung up on the Web, charging transaction fees to the sellers, not buyers. Publications, news services and market analysts provide information on the Internet for a subscription fee.

Some sites offer selected content free, but reserve some of the most valuable or interesting information for paying customers.

It's likely that much of the information on the Web will be advertising-supported, making it free in one sense. To that extent, your wish will come true.

Stuck in our corner of the galaxy

Q: What do you think about time travel? Will humans be able to travel to the past or to the future?

A: I'm an optimist about a lot of technology, but I really don't expect time travel. I could be surprised, though.

I don't expect anybody to travel faster than the speed of light, either. As a species we're stuck in this part of the galaxy.

Eventually some men and women will travel a light-year (the distance light travels in a year, about 5.9 trillion miles). But very few people will undertake these long journeys, which will consume enormous energy and time.

Besides, even if you go a light-year, you're nowhere -- only one-quarter of the way to the next star.

Science fiction suggests that someday hundreds of people will fill a huge starship and spend generations traveling to a star. For example, the great-grandchildren of the original voyagers might complete the trip.

Maybe so, but I'm not getting on the ship! I'm sticking here. We have lakes. We have rivers. We have mountains. Earth is amazing compared to what's available in the surrounding few light-years.

There are no comments - be the first to comment