Electronic commerce took what could be a critical step last week as Digital Equipment Corp. unveiled MilliCent, a system its developers say will drastically expand the ability to buy and sell on-line by allowing transactions priced at less than a penny.
The ability to execute extremely inexpensive transactions–without overwhelming billing costs–has long been considered crucial for the development of the Internet as a place for doing business.
“From the technology side, DEC’s introduction of this product is very important for the advancement of electronic commerce,” said Clare Gillan, vice president of applications research for International Data Corp., a research group in Framingham, Mass.
As part of the first public test of the system, DEC will allow anybody to log on to a special temporary Web site–www.millicent.digital.com–and purchase items. During the testing period, which is expected to last several months, users will be given free electronic cash to spend on items available from participating companies.
For instance, visitors can “pay” a dollar to get a prediction of the winds at the Thomas Point Lighthouse in the Chesapeake Bay. Word buffs can pay anywhere from two-tenths of a cent to half a cent to look up a word using the fabled reference books of the Oxford University Press. Music fans can buy a recorded song from several vendors for as little as a quarter. The system is most useful for purchase of music, information and other items that can be delivered digitally for little cost, rather than hard goods.
Eventually, the system will let users buy electronic cash–known as “scrip”–using credit cards. The scrip is kept on an electronic wallet on the user’s computer, and exchanged with a merchant during a purchase. The system will reduce the threat of fraud through the use of such tools as encryption technologies.
The ability to sell very inexpensive items–for fees as little as a tenth of a cent–has been a kind of Holy Grail for many on the Internet. Developers dreamed of a day when people wouldn’t buy Time magazine, they’d buy an article from Time for a dime. Boosters said people could be dinged a penny for every image, sound, or text file they downloaded off the net.
But consumers have turned out to be surprisingly resistant to the concept of what’s known as micropayments. “For a number of reasons it hasn’t emerged as rapidly as we imagined it would six years ago,” said Marvin Sirbu, professor of engineering and public policy at Carnegie Mellon University.
Sirbu developed what may have been the first large-scale micropayment engine for the Internet. Dubbed “NetBill,” the engine worked well enough that its underlying technology was licensed to a commercial company that now markets it on the Internet under the name “CyberCoin,” one of several micropayment systems being used on the Internet.
Sirbu suggests that such systems haven’t caught on in large part because people place an extremely high value on pricing predictability. They like to know exactly how much they’ll be paying from month to month for some types of goods and services.
“That’s why people would rather have telephone service for a flat rate even though usage-based pricing could actually be less expensive,” he said. And, he said, some people have argued that pay-per-use schemes for material like books and magazines discourage free, unfettered exploration and research.