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Management article
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Reference no. SMR43212
Published by: MIT Sloan School of Management
Published in: "MIT Sloan Management Review", 2002
Length: 4 pages

Abstract

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. A wireless Internet would solve these problems. User identity, for one thing, would not be an issue. Every wireless user has a unique, highly secure phone number to which the microcharge can be billed. A 3G wireless operator can charge 50 cents for a click at a specific site - and keep 10 cents for overseeing the transaction - as easily as AT&T can charge 7 cents for a one-minute call. And collection problems would be minimized because the wireless operator would bill and collect payment securely in the same way it does today. The development of rich, proprietary, profitable content will be at the core of a standards race between the open Web and the wireless Web. The ability of 3G networks to implement a microcharging strategy that provides a direct stream of revenue to content developers will give those developers incentive to sign exclusivity contracts and emphasize wireless-Internet development over open-Web development. As more content developers enter into contracts with 3G service providers, proprietary content will proliferate. The open Web will, in effect, revert to where it was 10 years ago, when the Internet was the realm of communities of interest without much commercial content.

About

Abstract

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. A wireless Internet would solve these problems. User identity, for one thing, would not be an issue. Every wireless user has a unique, highly secure phone number to which the microcharge can be billed. A 3G wireless operator can charge 50 cents for a click at a specific site - and keep 10 cents for overseeing the transaction - as easily as AT&T can charge 7 cents for a one-minute call. And collection problems would be minimized because the wireless operator would bill and collect payment securely in the same way it does today. The development of rich, proprietary, profitable content will be at the core of a standards race between the open Web and the wireless Web. The ability of 3G networks to implement a microcharging strategy that provides a direct stream of revenue to content developers will give those developers incentive to sign exclusivity contracts and emphasize wireless-Internet development over open-Web development. As more content developers enter into contracts with 3G service providers, proprietary content will proliferate. The open Web will, in effect, revert to where it was 10 years ago, when the Internet was the realm of communities of interest without much commercial content.

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