Who Pays for What On Tomorrow's Internet?

It's a thought that strikes terror in the hearts of entrepreneurs: What if their visions of on-line commerce turn out to be a mirage? What if all the information they hope to sell on the so-called Information Highway is free?

The threat is real enough that publishers, technologists, and legal scholars have begun a raucous debate. Their focus is how to protect copyrights in cyberspace. But the issue runs deeper than that.

These experts are really struggling to figure out the value of information in the coming Information Age. Who will control it? Who will have access to it?

These questions are so new that no one has come up with a complete answer, says James Boyle, a law professor at American University in Washington, D.C. ''We're tiptoeing into the Information Age.'' But last month the Clinton administration released a report on the issue that has fueled the growing and wide-ranging debate.

The most visible controversy revolves around the value of information. Some technologists and experts on the Internet, the global network of computers, believe the price of on-line information will fall to zero. Publishers, they argue, will have to find new ways to make money.

But publishers doubt their business models are out of date. They're calling instead for stepped-up protection in existing laws. Both sides agree there is a threat to commercial prospects.

The world is going digital. As television shows, movies, books, art, and music move onto computers, they become extremely easy to copy. The Internet's growing reach heightens this risk. With the push of a button, today's information pirate can make unlimited, perfect copies of a creative work and sell it to the world.

Many Internet experts argue that this technology soon will overwhelm the copyright laws that discourage such copying. ''This technology is essentially a copying technology,'' says Mike Godwin, staff counsel of the Electronic Frontier Foundation, based in San Francisco. ''So the attempts to control the copying almost flies in the face of the technology.''

If laws can no longer protect against copying, then creative artists, publishers, and software developers are in trouble. ''We are entering a new economic environment - as different as the moon is from the earth - where a new set of physical rules will govern what intellectual property means, how opportunities are created from it, who prospers, and who loses,'' wrote Esther Dyson, a software-newsletter editor, earlier this year in Wired magazine. ''Chief among the new rules is that 'content is free.' While not all content will be free, the new economic dynamic will operate as if it were.''

Instead of selling their information, on-line businesses may have to give it away, she argues. On-line service companies will still be able to sell access to the Internet, but publishers of information will have to make money selling ancillary goods and services. It's as if Hollywood showed its movies for free but sold related T-shirts, posters, toy rights, and videocassettes that the movies spawned. Some software companies, notably Netscape, already do this.

Value of intellectual rights

Of course most of the information now on the Internet is free. But many thinkers expect that as on-line payment systems are developed in the next couple of years, Internet commerce will explode. Thus, publishers believe their information will become more valuable, not less. ''Property rights and intellectual rights are more important than ever; they'll be more valuable than ever,'' says Peter Huber, senior fellow at Manhattan Institute for Policy Research in New York. ''I do not take seriously the people who say that copyright is finished.''

''Copyright law is a viable way, an effective way, of protecting property,'' says Steven Metalitz, general counsel for the International Intellectual Property Alliance (IIPA) in Washington, D.C. Since society benefits when people create original work, society offers them an incentive to create by giving a copyright. For a limited time, no one can copy and sell the work without the owner's permission. Thus, authors and publishers make money by selling or licensing the work.

Copyright has survived previous technological challenges. Modern-day pirates use everything from videocassette recorders to computers to make illegal copies of songs, software, and movies. Publishers lose sales of $15 billion to $20 billion a year because of piracy, according to the IIPA. Yet the business of selling information continues to grow.

That's why publishers are pushing a traditional approach, asking that existing copyright laws be strengthened. Last month, this argument got a huge boost from the Clinton administration. Its white paper ''Intellectual Property and the National Information Infrastructure'' recommended much the same thing.

For example, it suggests making it a crime to import, manufacture, or distribute a device or service that could defeat technological protections of copyright. Already, devices that decode scrambled satellite transmissions are illegal. The proposal would bring similar protection to works on-line. Legislation based on the white paper has already been introduced in both houses of the US Congress.

New technology may offer added protection. IBM, for example, is working on a slew of methods to discourage illegal copying. The company has teamed up with a German museum to put digital watermarks on images that the museum wants to put on the Internet. A digital watermark is a computer image ''stamped'' onto digitized information in such a way that it is very difficult to remove. It serves as an identification number. IBM is also using encryption to scramble digital works and on-line metering, which would monitor what on-line users were looking at and charge them, say, per minute or per page of information viewed.

Too much copyright protection?

Another group of Internet users - from on-line service providers to consumer groups and librarians - views such developments with growing alarm. Copyright law, they point out, involves a balance between the rights of copyright owners and the public. Too much copyright protection may do as much harm as too little.

For example, copyright law has long upheld a doctrine called ''fair use.'' It allows people, under limited circumstances, to quote from, copy, or otherwise use a copyrighted work without the owner's permission. But what happens if a publisher sets up an on-line metering system?

If a library patron copies a page from the metering system, then sends an electronic copy to a friend, he may run afoul of the copyright regime being proposed by the Clinton administration, these groups argue. In today's world, using a copying machine to make a couple of duplicates for personal use is usually considered ''fair use'' of the material.

The Clinton report also suggests making illegal the unauthorized electronic transmission of copyrighted material. Thus, an on-line service company, such as America Online, could be liable for violating copyright if one of its members electronically sends a newspaper article to a friend. It wouldn't matter whether America Online knew about the article. Under this liability threat, on-line services may have to monitor their members' transmissions, says James Love, director of the Consumer Project on Technology, a nonprofit consumer group in Washington, D.C., founded by Ralph Nader.

The US Constitution allowed Congress to establish copyright protection to ''promote the progress of science and useful arts.'' But ''the white paper is suffused with the premise that the means of promoting 'the progress of science and useful arts' is to protect commercial interests,'' adds Adam Eisgrau, legislative counsel for the American Library Association. ''Not a means but the means of doing so. And that's just wrong. It's wrong constitutionally and ... as a matter of public policy.''

Public access also promotes creative works, Mr. Eisgrau says, because scholars and artists need to bounce ideas off one another. If Congress chokes off that access by putting too much control in the hands of publishers, society will suffer, several legal experts say. Thus, the best move may be to wait for the world of digital commerce to emerge before legislating solutions.

''The law has some ability to structure the world, but more often than not, the law responds to what happens in the world,'' says Ethan Katsh, a law professor at the University of Massachusetts at Amherst. ''Whatever tinkering we do today is not going to be functioning very well in 2005.''