Face to Face

An interview with Robert Metcalfe, the founder of 3Com Corp. and the inventor of Ethernet, the most widely installed local area network

Metcalfe is now a journalist who delights in throwing intellectual bombs. As the former publisher of Infoworld magazine (for which he's now a columnist), the onetime technology entrepreneur has lately predicted periodic collapses of an overloaded and poorly managed Internet--thus angering a sizable number of folks who think that the Internet shouldn't be managed at all. But it will be, Metcalfe predicts, and he promises Inc. senior writer Ed Welles that the Internet's effect on commerce will be powerful and long.

Q. Is it time for entrepreneurs to start paying serious attention to the Internet, or is the Internet just another technofad?

A. The analogy I would use is that the Internet is to business what North America was to the Europeans in 1492. It's virgin territory, and it's lush.

Q. But as you've pointed out, the Internet periodically collapses. That doesn't sound very lush or permanent to me.

A. The Internet is being used for purposes for which it was not intended, and a lot of its underpinnings are rickety. The people who built the Internet say that everything is just fine and that the complaints I make about the absence of management and security and billing capabilities are bogus. They argue that the network doesn't need billing, management, or security.

Q. And how do you respond?

A. They're making excuses because they can't admit that when they were building the Internet, those issues bored them and were ignored.

Q. You want to see more infrastructure in the Internet?

A. We've built the bridge over the gorge to carry feathers, but now we're carrying coal. The system is rickety. When network outages get big enough, we'll call them collapses. We've already experienced some collapses. Others are coming. They'll be caused by equipment outages--like a router going down or a bunch of fibers getting chopped by a backhoe. There will be sabotage by some hacker or some meanie Unabomber type who decides that the Internet has been taken over by capitalist technologists and that it's time to end it all. Or there will be human error.

Q. Sounds scary. Will anything good emerge from that?

A. Eventually, people who are willing to apply systematic approaches for managing it will take over from the Internet's founders. Once that happens, an industrial-strength Internet will follow.

Q. Why do we need an industrial-strength Internet?

A. The information age is coming, and the Internet is what's bringing it. As seminal innovations go, the Internet is beyond the cotton gin; it's the steam engine. We need the Internet to unleash this next wave of economic and social development.

Q. Explain, please.

A. We've been putting a lot of things on the Web that have been around for a long time--mail and advertising, for instance--and now we're beginning to discover that we can communicate on the Web in different ways. We can advertise on the Web and discover different things about the people who are our customers. The Internet will be as big as the telephone, as big as television.

Q. Why would commerce increase on the Internet?

A. There are lots of reasons. One of them is that the Internet lowers the granularity of money. We can price things down to the mill--a 10th of a penny. With that micromoney, we can now create new ways to buy and sell intellectual property like newspaper articles, magazine columns, and bits of software. Pay-per-view TV is now easy on cable, whereas it was difficult on broadcast. Well, the Internet is the next step, because it is intrinsically two-way, or interactive. It will no longer be just the big cable-TV company selling a boxing match. Now it will be some guy out in Oregon selling something nobody knew about before, because he doesn't have to advertise to get to you, as he would in other media.

Q. What about advertising? Will the Internet be an effective medium?

A. The Internet is organizing itself to be a very good advertising medium, because it's becoming a measured medium. The big money in advertising goes through only measured media.

Q. In other words, you can track how many people have actually seen the ads?

A. And the demographics of those people. The advertising system that evolves on the Internet will be capable of greater accountability than existing systems are, because the Internet is two-way. Advertisers can tell what you're looking at, how many times you've looked at it, how much time you spent looking at it, whether you clicked the button that says, "I want more information." Advertisers will get more bang for their buck, because the Internet is more targeted.

Q. Will the Internet become more palatable to more people as a place to buy and sell goods and services?

A. Yes, and here's where some urgency arises. You should be on the Internet already if you're selling a product that comes in bits and can be delivered over the Internet. Netscape is a great example of why that's so. Netscape delivered its browser over the Internet by the millions within a week or two of the browser's development. The company didn't shrink-wrap it and put it in stores. It sent it right through the Web. Boom, within a few weeks Netscape was a billion-dollar company. If you're selling hard goods--refrigerators--the value proposition is not as strong yet.

Q. Does that kind of distribution threaten existing software companies?

A. Well, companies whose defensible position was distribution have to think of a new way. Microsoft controlled all the shelf space, but Netscape blew right by it. So, all the people who sell shrink-wrapped software have a problem.

Q. Is the Web a boon to small companies?

A. Yes, because it lowers the distribution and advertising barriers. You'll be able to buy advertising in much more targeted and smaller pieces. When you have just one big audience, like NBC's, for instance, then you have to be really big to afford to reach that audience. The Web will be useful to small companies for the same reason that radio is still around: you can afford to advertise on Lincolnville, Maine's radio station, where it costs you $30 a month, even when you can't afford NBC. The Internet creates even more highly targetable advertising opportunities. It bodes well.

Q. Do you mean that every small business needs a presence on the Web?

A. It's so cheap to be on the Web that it's hard to imagine why a company couldn't be. My wife runs a nonprofit education foundation, and it costs diddly for her foundation to create and service a Web page, where it sells a few things to generate revenues. So even if you make a mistake, it's not a big expense.