'Nickel and diming' across the Internet

"I'm guessing there's going to be a lot of cottage entrepreneurs springing up selling all kinds of information products," Frey says. His DaVinci Institute sponsored a Future of Money Summit last fall that looked closely at the concept of micropayments. He imagines, for example, someone selling thousands of type fonts ("a font superstore") or other graphics over the Internet for tiny fees.

People also could sell sheet music, cellphone ring tones, or photos for as little as a few cents apiece. Video-game players doing onscreen battles could upgrade their onscreen avatars with better weapons or fancier outfits (maybe a pair of cool digital sunglasses) for pennies. Blue-skying even further, Frey sees microinsurance policies that, for example, insure that what you buy on eBay works correctly when it arrives.

But not everyone is convinced that small is beautiful in e-commerce. Despite these innovations to lure consumers into making tiny transactions, micropayments are inevitably "doomed," says Clay Shirky, a professor at New York University's Interactive Telecommunications Program. "The problem with micropayments is that users hate them," he says in a phone interview. "We have a colloquial phrase, in fact, for micropayments: It's called 'being nickel-and-dimed to death.' "

Professor Shirky, who has written about the culture of the Internet, says the Web has always been a place where people find plenty of free content and have no incentive to pay. The desire of publishers and others "to believe in the magic pixie dust of micropayments is so strong," he says, that his "boring" position that things won't change is somehow "seen as quite radical."

Shirky cites as a counterexample the trend in telephone rates away from pennies-per-minute pricing to flat rates. Metered billing is being "blown away" by nationwide all-you-can-talk plans that are preferred by customers, he says. Even the pornography industry, which has led the way for much of the innovation in e-commerce, has failed to transfer the model of the quick 25 cent peep show to the Internet, instead opting for subscription payment plans.

Old-line publishers, he says, have failed to account for the "amateurization of publishing" online - the ocean of free information. They might be better off, he says, using what he calls the National Public Radio model: "periodic begging."

The idea of tiny transactions as small as a penny whizzing around the Web has been talked about as a way to fight computer viruses and spam, the unsolicited junk e-mails that pile up in inboxes.

Microsoft's Bill Gates and others have proposed creating a system that would allow networks to charge senders of unsolicited e-mails "postage," just as people must pay to send a physical package.

Even a charge as low as a penny per message could deter spammers, who often send out millions of solicitations. Users could create "do not charge" lists for friends and business associates who e-mail them regularly. Money received from incoming e-mails could later be used to pay for outgoing messages.

Such a system would supply a need to "create conditions to make spammers pay for their follies," says Sonia Arrison in a report called "Canning Spam: An Economic Solution to Unwanted Email," issued by the Pacific Research Institute in San Francisco earlier this month. "A pay-to-enter plan eliminates the problems associated with current spam-fighting techniques" that either filter out too many or too few messages.

One company, Silicon Valley-based Goodmail Systems, is about to set up such a system of one-cent e-stamps through deals with various Internet Service Providers (ISPs).

But such well-intended e-stamp programs could have a hidden danger, says Clay Shirky, a longtime Internet observer and a professor at New York University.

If commercial interests pay to send e-mails, he reasons, they may feel as though they, not consumers, own the system. In other words, he says, e-stamps might reduce the worst kind of spams, but ironically they may also lead to the capture of the Internet by the spammers.

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