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ONLINE BUSINESS

Is the Internet Doomed?

A close up look at some of the problems businesses should consider before they start using the Internet.
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Before doing business on-line, consider the problems that could make cyberspace go the way of CB radio

Sooner or later, everyone who connects to on-line services wonders what he or she is getting into. My own anxieties began about eight years ago, soon after I joined CompuServe, then the largest computer network available to people who didn't work in government or science. Grazing happily through the service, I discovered many games that would be of interest to my stepson. I was pulling one down into my computer late one evening when the incident occurred.

Being a novice user, I did not know that when I was on-line my presence could become known to other CompuServe users. I was astonished when my computer beeped to inform me that Dave from Texas wanted to know if I wanted to chat with him. Taken aback to learn that strangers could jump into my personal space, I had no desire for a tête-à-tête. "No thank you," I typed.

Dave from Texas cursed me out. Vehemently. I cut the connection quickly, of course, but Dave from Texas had given me the willies. Seeing the four-letter words pop onto the screen had been like opening the study door to discover a vandal ripping out my desk drawers. I felt violated, invaded, soiled.

With more experience, I now realize that Dave was probably a harmless 13-year-old reveling in his newfound ability to tell off a stranger. Still, he taught me something. Even in those days, computer visionaries were foretelling a future in which the whole planet would be wired together -- a global village, in the argot of the day. With a few keystrokes, I would be able to reach anyone, anywhere, anytime. Dave from Texas made me realize that the opposite was true as well. Anyone would be able to reach me.

Today the buzzwords have changed. The global village is now the Internet, the World Wide Web, the information superhighway. But the problem still remains. As long as the superhighway is filled with people like Dave from Texas, other people are going to get sideswiped when they take a spin. In response, they may get off the road and not do their shopping there after all. The problems will only grow worse when millions more clamber aboard the Internet. As the tales of outlaw hackers demonstrate, not all the Daves are harmless loudmouths. Some will treat the Internet as a vehicle for crime and its access to millions as a huge opportunity for vandalism and theft.

The specter of Dave from Texas, though, is only one facet of a greater, more general difficulty: the openness and flexibility that give the Internet its dazzling promise as a universal means of communication and commerce also work to frustrate that potential. Indeed, they may even lead to the network's eventual collapse.

* * *

The Internet is often described as a "functional anarchy," in the phrase popularized by science-fiction writer Bruce Sterling. The description is accurate. The network resembles a group of kids hanging out at the mall. No one member tells the others what to do or how to behave, but they tend to stick together anyway. They sheepishly lumber from the video arcade to the CD store to the shop with $130 basketball shoes. Things work out fine, despite occasional personality conflicts. Note, though, what makes this mode of existence possible: mom and dad, who furnish the money. The Internet is like that. It is a sociotechnical entity wholly evolved in the giddy freedom that comes from not having to worry about the bills. In the case of the Internet, the parental unit was the Advanced Research Projects Agency (ARPA) of the Department of Defense. (It was later called DARPA, the initial D standing for "Defense.") True to its name, DARPA was concerned with what Vinton Cerf, the former Stanford engineer and one of the principal designers of the Internet, calls "highly flexible, dynamic communication for military application." Its researchers were investigating how to link officers at headquarters with soldiers on battlefields thousands of miles away. Because wartime bombing might destroy any individual computer and its operators, the network needed to function no matter what pieces remained; it couldn't have a single brain.

To achieve that, Cerf and others designed the TCP/IP protocols. When one part of the Net requests information from another, the Transmission Control Protocol software breaks up the data into chunks and numbers them for reassembly like so many model-plane parts. The Internet Protocol then shoots each chunk zigzag style from computer to computer to its destination. The process is inefficient but highly reliable; pieces may travel by different paths, take longer than necessary, and arrive out of order, but they show up at the proper destination.

TCP/IP and the other innovations behind the Internet were remarkable technical achievements. But they were designed to link together a few thousand people, most of them on the government payroll; they were not intended to become a medium for millions of ordinary people, most of them paying their own way. Still less were they conceived as vehicles for commerce. As a result, the innovations that made the network possible have also created its worst problems.

For instance, the TCP/IP protocols allow the Internet to be expanded with wonderful ease. Anyone can join. Instead of straining the system, additional sites mainly represent new transmission routes. When the National Center for Supercomputing Applications in Illinois released its Mosaic software in 1993, tens of thousands of new individual users climbed onto the Internet from their homes.

Unfortunately, the TCP/IP protocols have another, less desirable feature, according to Bridger Mitchell, an economics consultant who is the coauthor of Telecommunications Pricing: Theory and Practice (Cambridge University Press, 1991): they make it difficult to allocate services. DARPA didn't care about how much the Internet was used. But because the costs of use are disconnected from the price paid by users, Mitchell says, the TCP/IP protocols represent "a recipe for gridlock."

Once people and institutions installed their connection to the Internet, they were free to play with it. Electronic mail, file exchanges, databases, network games -- no matter what you did, the price never seemed to go up. When friends in a physics lab invited me in the mid-1980s to play adventure games on the DARPAnet, I didn't think for a second about whether the games originated at their home computer or on the other side of the country. We just stayed in front of the screen for hours, typing our way through the story. Some of the researchers had been playing for months and had been having a terrific time.

The freebie tradition continues to this day. Pay your hourly or daily or monthly access fee, and it doesn't matter whether you are spending the time sending short, valuable E-mail messages to a computer one mile away or downloading a huge pornographic pic-ture from a computer in Bangladesh. Users act like kids let loose in the mall. Running from one place to another, they buy and buy until every cent is gone. Except that on the Internet, there's nothing to halt the process. There's an endless supply of kids, and all the goods are for free. There's no reason to stop until the mall is looted and the buildings have collapsed beneath their feet.

* * *

In 1975 an unknown country-and-western artist known as C. W. McCall zoomed to the top of the charts with "Convoy," a song about the then-new technology of citizens-band radio. It helped to create a nationwide mania for CB -- one that, in retrospect, makes Internet experts nervous. Like the Internet, CB had no central brain and nobody in charge. Like the Internet, it provided instant, unregulated access to an invisible community. And like the Internet, it was free, more or less. People could use it as much as they wanted after they paid an entrance fee, in this case, the price of a CB. "The result was incredible radio congestion," says Jim McConnaughey. "It apparently reduced the quality of communications so substantially that most people stopped using it."

McConnaughey is a member of the Universal Service Working Group of the Information Infrastructure Task Force (IITF), a federal-government task force overseen by the White House. The IITF is one of many groups working to prevent the Internet from being loved to death. "I, too, am torn," McConnaughey says. "I like free things as much as the next guy. And once you figure out how to get on the Internet, you're a kid in the candy store -- you're 'free to surf around.' In addition, easy and inexpensive access could be a real boon to kids for educational reasons. But the easier and cheaper you make access, the more potential you have for the system to be mobbed."

The White House set up the IITF in 1993 partly because the appearance of Mosaic and other easy-to-use Internet explorers that year were drastically increasing the number of people on-line. In addition, the near-simultaneous wave of enthusiasm for multimedia applications made it clear that every one of those new users would have the power to suck up vast stores of computing power. Sending a word from one computer to another typically means transmitting about 50 of what the digital-pulses engineers call "bits." Sending a picture typically means transmitting about 500,000 bits, a much bigger but still manageable number. But a typical second of video uses up a staggering 50 million bits. When it was first set up, NSFnet -- the link between the nation's most advanced supercomputers -- had a transmission capacity of 100 million bits a second. In other words, the entire network would have been able to carry two Rolling Stones videos.

Capacity has increased manyfold since then, but the specter of the negative synergy between the rising number of Internet users and the appeal of multimedia has network experts wringing their hands. "The average load is not the problem," says Hal Varian, a University of Michigan economist who has written widely about the Internet. "Most of the time the Net is working at maybe 5% of capacity. But the peak load is a major concern. Service begins to degrade at about 20% of capacity, and a sudden upsurge can make demand jump to that point in an instant."

The Internet, in other words, is like an electric utility. Most of the time, there's plenty of power for everybody. But when thousands of tired commuters come home on a hot summer afternoon and switch on the air-conditioning, the lights suddenly dim. To prevent Internet brownouts, vendors will have to install a lot of equipment; in the long run the bill may run to billions of dollars. But, Varian says, the increase in capacity will lead to an increase in demand, in much the way that building new power facilities encourages people to buy more air conditioners. And, of course, someone will have to pay for that equipment.

Explosive growth in demand may happen sooner than anyone expects, according to Mitchell Kapor, founder of Lotus Development Corp. With complaints of delays already frequent, the release in April of Real Audio Player software, which enables real-time audio broadcasts over the Internet, may tax the system enormously. "Religious broadcasters will grab onto it, as is their right," says Kapor, who is now at the Media Lab of the Massachusetts Institute of Technology. "But can you imagine the strain on the system when millions of worshipers find out they can listen to Billy Graham live on their computers?" Kapor thinks the increased demand will ultimately foster the growth of the Internet, but others are not so sure. Projections from the nonprofit Internet Society predict that unless new protocols are adopted the system's routing computers, which direct traffic throughout the Net, may be overwhelmed by 1997.

To economists like Varian, the solution is to impose prices. Economists love prices because they make everyone sensitive to costs. Consumers are encouraged to clean up their acts by not hogging the lines with frivolous requests for the hundreds of pictures of Austrian beer labels that a suds fan has stashed on-line. Vendors are encouraged to clean up their acts by providing high-quality services that will attract paying consumers. When usage is priced, resources are allocated efficiently and rationally -- qualities in short supply at the moment.

The difference between a system with prices and one without is visible, alas, in my own behavior. When I dial into PaperChase, the $18-an-hour link to the medical database MEDLINE, I plan my incursion with the care of Stormin' Norman attacking the Iraqis. I write down my goals beforehand, blast in, grab my data, and rush out -- all in a few minutes. Because users like me are in and out quickly, it always seems possible to make the connection. If the lines get jammed, PaperChase will put in more equipment, knowing that it can recoup its investment.

By contrast, when I go onto the World Wide Web I may clog up the network at peak time by downloading a video of former President Bush bonking somebody on the head with an errant golf ball. After I glance through this for a few moments, I may then skip on to the collection of recorded burps that some aficionado of eructation has put on-line. If the lines get jammed, the Bush hater and the burp man who uploaded the files I retrieved will do nothing. Nor will I. "There's no incentive to do otherwise," says Varian. "Why should people restrain themselves when the next guy is free to abuse the system?"

Varian and others have proposed methods to make users sensitive to costs, but all methods face grave difficulties. Some of the difficulties are technical. For instance, the World Wide Web and many other Internet applications are "client-server" based. The client sends in a request for information to a more powerful computer, the server, which then pulls in the data and sends them back to the client. To the network as a whole, it appears that the server is generating most of the traffic. The client, who should be charged, is almost invisible.

Overcoming the problem would require labeling and tracking each of the separate packets of information in the TCP/IP protocols, which would be an accounting nightmare. Telephone calls can be billed with relative ease because they are continuous. To itemize them, companies need to generate only a single accounting record -- a connection between one number and another that lasted, say, 10 minutes. Because of TCP/IP, the Internet is different. What looks to the user like a single stream of information is really many small chunks of information that travel through the network by different routes. As a result, following every Internet "call" would involve many accounting records, as each packet traversed its separate route through the system. Indeed, Varian has estimated that billing a 10-minute Internet session telephone-style would require 25,000 accounting records. (A newer protocol, asynchronous transmission mode, simplifies matters somewhat by sending all packets on the same route. But it has never been fully tested or implemented.)

That means, according to Jeffrey MacKie-Mason, another Net economist at the University of Michigan, that billing for Internet sessions as if they were telephone calls is "flat-out impossible." Instead, he argues, use of the Internet could be priced in somewhat the same way as use of the postal service -- by stamps. Consumers would buy Internet "stamps" from their providers and spend them every time they made a connection. Charges would depend on the type of service and the demand on the system at the time. Still, he says, "the accounting costs are a big question. They could well be impossibly high."

But even if the technical problems can be overcome, MacKie-Mason notes, a successful pricing system would create another problem -- one with special import for the thousands of businesses now clamoring to get onto the Net. If the Internet is no longer free, people would be forced to decide how much they value it. In many cases, the answer seems to be "not much."

* * *

In my constant quest for bargains, I have briefly signed up with a number of Internet providers, only to become exasperated by the maddening randomness of the Net. I keep searching for something that is cheap enough to make slogging through the complicated searches not feel like a waste of time. Not long ago I was halfheartedly registering with yet another service while reading the New York Times. It happened to be the day after the FBI arrested Kevin Mitnick, the hacker who broke into the computers of computer-security experts. As I dialed up the on-line registration form, I read how Mitnick had also slipped into the WELL, the network in San Francisco. There he had stolen the credit-card numbers of 20,000 members. My modem made that strange electronic flushing noise as it connected to the on-line registration service.

Then the service asked me for my credit-card number. I reacted emotionally. I clicked the "cancel" button and ended the procedure. A few days later, I joined, realizing that my earlier ventures into the Internet already had sprayed my credit-card information all over cyberspace.

But my hesitation is emblematic of another fundamental problem with the Internet -- lack of trust. As everyone in business knows, transactions cannot take place unless there is some trust between buyer and seller. Buyers need to believe that merchants are selling goods that are what they appear to be; sellers need to believe that consumers will actually pay. In a store the necessary trust is easy to establish. The shop, with its cash registers and displays of merchandise, is a statement of the vendor's permanence; it will be there if the buyer needs to return the purchase. The advantage for the seller is that the store allows buyers to pay in cash or by check in person; the merchant can verify the consumer's identity on the spot.

The Internet is different. Generally speaking, businesses locate on a part of the Internet called the World Wide Web, which allows them to set up "pages." Pages are identified by strings of letters and numbers called Uniform Resource Locaters (URLs). URLs can be unwieldy. For example, the one for Noteworthy Music, a compact-disc seller in a service called the Netmarket, is http://www.netmarket.com/note-worthy/bin/main/:st=yln4pbm227|4. When users enter URLs into their Mosaic software, they are conveyed to the appropriate Web page (if the Internet isn't too crowded to prevent the signal from going through). Pages typically display company logos and descriptions -- and little pictures called icons that guide consumers to further information on the products and to order forms. The format is dictated by a computer language called Hypertext Markup Language (HTML). As a result, pages look very much like one another, just as one display ad in the yellow pages looks like its fellows.

Unlike yellow pages ads, though, Web pages don't necessarily correspond to any particular physical location. In preparing this article, I contacted about 40 firms with pages on the Web. All had color photographs and little computer icons to click on. But the companies behind the displays varied considerably. Sometimes when I called, the phone was answered by a professional sales operator, and I could hear telephones buzzing and computer keyboards clicking in the background. But other times the phone was picked up by a staticky home answering machine or by people who identified themselves as relatives and once even by an eight-year-old. ("Frankie! Frankie! It's some guy from the computer!") From the information on the Web, there was no way to know Car Mats-R-Us belonged to a big automobile-parts chain in Georgia, while Alaskan Gold Nugget Jewelry was really an attempt by David Dorfmueller, a computer jock in Alabama, to introduce the beautiful jewelry made by his sister to a larger audience. "We know we're credible," he admitted. "But who else does?"

Partly because of the credibility problem, none of the businesses I spoke with were making much money. Leather and Lace, a mail-order lingerie outfit in Pennsylvania, had been on-line for five months when I called. About 135 people looked at the Leather and Lace page every day, said Michelle Hammel, who handles the Internet trade. Of those, about half went further and looked at the products. And about 1 out of 20 ordered a catalog. "But there have been no sales as of this moment," she said. (Perhaps that's why no one returned my calls when I tried to reach the company three months later by phone to make sure I had understood what she said.) Dorfmueller, of Alaskan Gold Nugget Jewelry, had a similar tale. "There's a lot of hype out there," he said. "But the numbers aren't mind-boggling."

Buying on the Internet requires customers to change shopping habits completely, says Glenda Shasho Jones of Shasho/Jones Direct, a direct-mail consulting firm in New York City. Shoppers go to malls partly to touch the merchandise and partly for a social experience. By contrast, shopping at home with a catalog is a desultory activity, something to do while doing something else. Shopping on the Internet is as intensive as shopping in a mall but not as social -- and as private as shopping through a catalog but much more intensive. "You look through a catalog while you're sitting in front of the TV or lying in bed at night or when you're in the bathroom," says Shasho Jones. "You're not staring intently into the screen." Companies by the score have already failed to persuade customers to buy from CD-ROMs. "Why," she asks, "should it be different on the Internet?" Nonetheless, Shasho Jones was optimistic about the long-range future of the Web, as were all the other small businesspeople I spoke with.

Rodney A. Jordan set up the Web page for Black Heritage Products, a North Carolina-based distributorship of goods made by African American manufacturers. Black Heritage had not sold a dime's worth of merchandise in its first month on the Web. But Jordan, a distributor of the company's cosmetics and hair-care products, was excited enough about its potential to have created MelaNet, a Web page for small African American businesses. When I spoke with him, MelaNet had just enrolled what Jordan believed was the first mortuary to offer services on the Internet: the Carlos A. Howard Funeral Home, in Norfolk, Va. "They are really coming on board," he said of the minority businesses that are his target. "We offered the first Kwanzaa information center on the Net and the first African wedding guide. And black florists and stores are able to advertise in them. It's really the wave of the future, I'm convinced." Still, he admitted, "I tell MelaNet shoppers not to use credit cards on the network."

The reason for the fear, of course, is that consumers worry about being cheated not only by merchants but by hackers -- and with good reason. As packets of information swirl through the Internet, special programs called "sniffers" can copy their relevant parts, such as their electronic destination. Because the Internet shunts information every which way, any location can see every kind of traffic. "That means that any computer system that is careless about security compromises dozens of other systems that are not," says Jeff Schiller, a computer-security expert and a professor at MIT. Which means that there is little way of ensuring that personal data will not pass through someplace where malicious versions of Dave from Texas lurk. Or that Dave from Texas will not use the information to contact unsuspecting merchants and bilk them.

"It is easier today for a hacker to go on-line and get hundreds of credit cards at once than it is for him to get a job as a waiter and pick up credit-card numbers one at a time by looking at the carbons in the wastepaper basket," says Tom Lytle, an electronic-marketing specialist at the New Hampshire-based Lytle and Co., which handles credit-card transactions for direct-marketing companies. "Until that is addressed, I am skeptical about how willing consumers will be to get involved."

Several companies have rushed to proffer solutions, among them Cybercash, of Reston, Va. Founded last August, the company plans to create a sort of on-line ATM. Consumers wishing to shop on-line can ask their regular banks to make electronic deposits into the Cybercash bank. When they make a purchase, they authorize the Cybercash bank to send the merchant an electronic "check" that can be deposited in a real, off-line bank. Schemes like this are sometimes called "digital cash" or "E-money." A full-scale trial is scheduled for this summer.

With digital cash, merchants never see customers' credit-card numbers -- an important advantage, according to Cybercash marketing vice-president Magdalena Yesil. "In the 3D world," she says, using the hackers' term for noncomputerized life, "a lot of credit-card fraud comes from bad merchants. That would be especially true on the Internet, where there are no bricks and mortar, and the merchants would be apt to appear and disappear." And all Cybercash transactions are encrypted, making it hard for hackers to sniff them.

Lytle believes that digital-cash schemes will ultimately succeed for transactions that involve small sums of money. But transactions with larger sums, in his view, will always run up against the inherent risk of putting personal information on the Net. That risk, he says, "represents a kind of price that people will have to be willing to pay. Add that to the real likelihood of having to pay for the service, and you have to wonder how many people will continue to find value in it." Even today, he notes, few people are willing to pay long-distance charges to order from catalogs.

"My fundamental belief," Lytle says, "is that until the Internet platforms provide a predictable experience, there's not much value to the consumer." The very openness, accessibility, and anonymity of the Internet work against the predictability that is essential to business. "You can go to the real mall, where there are stores like McDonald's and Home Depot that are familiar to you. Or you can go to the virtual mall, where there are 50,000 stores that might be great, or else they might rip you off and disappear. A lot of people don't want the adventure -- they want to go to Home Depot and know they can get the rake they need. On the other hand, making the Internet easier to use by closing it off to everybody but Home Depot would just about kill it. Either way, you're in trouble."

Not many in the computer world know it, but the frustrating trade-offs that bedevil the Internet were anticipated decades ago by the German philosopher Martin Heidegger. Heidegger loathed science and technology, but he knew a lot about the dilemmas of existence. One of the principle insights in his magnum opus, Being and Time, is that people's worst problems are always created by their best features. Heidegger applied this insight to matters of life and death, but it also pertains to more lowly matters like computer networks. The Internet is exciting because it promises to create a future in which every part of the world will have instant access to every other part. People in Manhattan will be able to teleconference with people in Manila while inspecting information about sales from Milan. After the workday they will click on music videos from a salsa database in Mexico City and shop for the latest fashions from Mozambique. And who could resist such a picture? No one -- and that's the problem.

To avoid being swamped, Internet providers will have to make somebody pay for the usage. Maybe not downloading users, but uploading vendors. They've resisted doing this so far, and with good reason. If I have to pay a fee, I'm not going to use the Internet for my music; I'll put on a CD. Vendors, manufacturers, and service providers may induce me to use the Net by picking up the bill. That will doubtless make the system more attractive -- I'll listen to my music on the Internet after all. But when the sponsors of Web pages have to carry the freight, they may think twice about what they are doing. Almost certainly many of the amusing loci about burps and golf swings will disappear. Small businesses may not be far behind, leaving the Internet to the likes of Wal-Mart and Home Depot. Even if a small company chooses to remain on-line despite the higher costs, it will still have to convince me that buying something across the wire is not a foolish act.

None of this guarantees that the Internet will not become what its boosters hope. Eventually -- decades from now, perhaps -- technology will drop the costs to almost zero and ensure security. But until then it will be a tall order for the Internet to preserve its essential features and radically change them at the same time. Unfortunately, one does not have to look very hard to find technological innovations that failed to meet this challenge.

After the CB craze, a relative sold me an old car with a CB attached to the dashboard. I tried it a few times but could never make it through the cacophony of voices. Hoping it would be useful in emergencies, I kept it in the car. But the one time a tire went flat, the friend who had borrowed the car refused to use the CB -- he had heard that distress calls attracted people like Dave from Texas. When the radio was stolen, I didn't bother reporting the theft to the police.

* * *

Charles C. Mann is a contributing editor in science at the Atlantic Monthly . His most recent book, Noah's Choice (written with Mark Plummer), came out in February.


FOUR WAYS TO LIMIT YOUR RISK ON THE INTERNET

The Internet has the potential to be a remarkable tool for business. But unlimited access by users of all stripes raises some serious issues. If you're looking to play it absolutely safe on the Net . . .

1.Don't go overboard with your investment. Expect any revenues you generate to be a very small part of your business for the foreseeable future.

2.Be prepared to deal with hordes of browsers or to inconvenience your customers by requiring passwords.

3.Assume anything you send or expect to receive could be intercepted.

4.Don't ask for credit cards

Last updated: Jun 15, 1995




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