The Death of the Open Web

The Internet is at a crossroads. The dot-com debacle has raised the possibility that the idea of universal access upon which the Web is based may not be economically viable. Advertising-based business models have generally proved disappointing and small, per-click payments known as microcharges — long viewed as the Holy Grail of profitability for the open Web — have been difficult to implement. But now, third- and fourth-generation (3G for short), high-speed wireless networks, once viewed exclusively as providers of mobile broadband access, can provide something more fundamental: the widespread implementation of microcharges. That may set in motion an evolution away from the open Web as we know it and toward a “wireless Internet” that would be, in effect, a Web of proprietary webs.

The advantage of the wireless Internet over the open-Web Internet is essentially the advantage of microcharging over advertising. Specialized content, which, almost by definition, implies narrow audiences, limits the value of advertising and is, in turn, limited by an advertising-based business model. The use of microcharges will give the wireless-Internet business model a great advantage by promoting the development of rich and specialized content that would not be profitable on the open Web.

The Impact of Microcharging

Although many content providers on the open Web already charge access fees, most require subscriptions and do not allow for true microcharging — that is, item-by-item fees for units of content like, say, 50 cents for one-time access to a news story from Dow Jones Interactive. There are four reasons for this: First and foremost, identity on the open Web is private. It can be concealed or easily faked. As a result, direct billing to users has not yet been feasible without preregistration. Transactions, then, require specific setup and billing procedures that can prove limiting. Second, the costs involved in registering and implementing a credit-card transaction often exceed the small fees for one-time transactions. Third, charging a fee may compete with advertising. Sites that provide access only to fee-paying customers run the risk of losing advertising revenues because the audience is usually smaller and subscribers may not be as amenable to viewing advertising on a site for which they already pay. Finally, although e-currency could provide a way out of the dilemma, problems with security, collection and coordination among diffuse sites have hindered its acceptance.