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On Thu, 4 May 1995, PHILIP E DAOUST wrote:

> I seriously question that Internet users, who have come to expect open and
> relatively free access to information, would be willing to pay in the 
> future for what they get free now. 

People pay *something* for the internet now.  They pay access fees.  They 
pay either a flat monthly rate, or an monthly rate plus an hourly rate 
for the extra time they use.  I started on AOL and quickly ate my free 
internet time.  I switched to Delphi and got a whole 20 hours/month for 
$20/month.  Then I switched to digex where I get 6 hours/day.  Then I 
found I was using it to do research for work, ALOT.  Suddenly I was into 
the $100/month catagory (all you can eat at 14,400).  Then the company 
noticed we were racking up phone bills and individual internet fees 
(about $6000/month) and put up a firewall/router to dual 56k.  Within a 
few months, we were up to T1.

Dow Jones offers a procuct line with a similar cost structure.  The NRS 
user logs in for 30-90 seconds, does a search and down-load and goes away.
This costs over $1/minute and $1.50/kbyte.  Late night users can get 
$30/month access but they still pay $1.50/item.  Then there's DowVision 
feeds via Mainstream at $100/month for "all you can eat off the feed", and
Corporate Lan service that can run from $100/user down to as little as 
$2/user/month (when you get about 50,000 users).  Rueters, S&P, and AP 
have similar packages.

The web provides some unique opportunities.  The availability of content 
on more servers means a better response time for everyone.  It may be 
logical to set up distribution schemes between web servers for "high 
octane" content.  With secure http (or SSL), one could use a "domain 
server" to get authentication validation the same way that DNS servers 
are used to get host names.

It may make sense to distribute feeds to various servers (at bulk rates) 
and to let the locals (probably more targeted around interest groups) 
would then collect a single "access fee" based on their estimated needs.
If I'm only a drop-in, I could pay $2 for one-shot visits.  For $10, I 
can have 100 hits, for $30 I could have 1000, and for $100/month I get 
all I can eat.  Corporate accounts - $300/user in singles, $100/user for 
10 users, $10/user for 1000, and so on.  Web servers could buy "bulk" and 
just provide authentication when it is requested.

It might be good to have a few single points of contact for exchanges 
(banks).  If a digex user wanted to read Dow Jones, he would set up an 
account with digex, pay $100 and digex would give him an account at a 
"bank" (First Virtual or NewsShare).  The client would connect to the DJ 
server and pass the encrypted key and FV account.  The server would then 
authenticate by issuing a secured request to his bank (NewsShare) through 
a trusted link (dedicated or PGP).  NewsShare would communicate to FV via
trusted link, FV would convirm with digex via trusted link, and the 
authorization would be confirmed in a matter of milliseconds.

The advantage is that the user doesn't have to negotiate with 2000 
servers and the servers don't have to negotiate with 2 million users for 
$2/month billings.  At the end of the month, hits are scored by the 
banks, converted to proportional values against the entire pool, and the 
pool is then distributed in the form of royalty checks.

Kismet!

> Furthermore, newspapers should not plan to make substantial amounts of 
> money from going online and charging for access. First, the competition
> will be fierce because it is becoming so easy for anyone to go on line 
> Economics will be a big factor.  Fortunately, the costs are relatively 
> low, and the revenue potential is substantial.

It is hardly likely that 20 million users would subscribe to all 20,000 
commercial servers, even for $1/year.  On the other hand, servers who 
provide frequently visited content will do quite well.  Given that there 
are about 14,000 frequently visited newsgroups, it's quite likely that 
14,000 servers could thrive quite nicely.  Even if you only permute the 
6000 "alt" groups against geographic and economic lines, there should be 
at least a substantial income every day.

> with news and information. Second, how many Internet users will tolerate
> advertising online? It is my belief that online folks cruising the infor-
Tolerate it?  They seem to be eating it up!  I've hit MecklerWebs ads, 
MCI, and about 30 other advertizers.  I've actually been able to get 
critical information with regard to purchases that were called 
Advertizing, and I've actually made purchases based on "fluff content" 
(like news and e-mail).

> mation superhighway will take detours as soon as the billboards starting
> going up. Third, there is still a large majority of news consumers who
> don't even own a computer, let alone understand the WWW and URL's. 
The great thing about the web is that you don't have to understand URLs, 
you just have to be able to "point and click".  Just think of it as a 
very BIG MacIntosh :-).

The best news is that the market is nowwhere near saturated.  Although 
about 40% of the population do use a computer at least occaisionally, 
only about 2-4% are currently using on-line services.  This means that 
the potential for growth from even 20 Million to some percent of 2.8 
billion users is very possible.

What we consider obsolete in the corporate work-place may turn into a 
"hot commodity" in the home market.  This is especially true if Corporate 
America scuttles it's DX/66s and P/90s in order to upgrade to WindowsNT 
and Windows-95.  There will be about 10 million "boat anchors" that would 
be great in the home, especially with an operating system that didn't 
need 32 Meg, 200 mips, graphics accelerators, and caching SCSI drives 
just to run "as well as" Windows.  I won't say the L***x word again :-).

> News organizations planning on online subscriptions as cash cows
> have a big surprise coming, in my opinion. 

> Philip E. Daoust
> San Francisco State University

	Rex Ballard
	Standard & Poor's/McGraw-Hill
	Opinions expressed do not necessarily reflect
	the Management of the McGraw-Hill Companies.




From rballard@cnj.digex.net Tue May  9 22:09:56 1995