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The Internet Power Grab

By: John Ellis
Everyone knows that the Internet is moving from free to fee. So why isn't the Internet army fighting back?

The great transition that is taking place on the Internet -- from free to fee -- is now gathering speed. You used to be able to listen to audio streams of Major League Baseball for free. Not anymore. Now you have to buy something called Total Ticket at www.mlb.com for $9.95 a month or make do with Gameday Audio for a onetime fee of $14.95. You used to be able to read the Financial Times at www.ft.com for free. Not anymore. Now you have to buy a subscription to read its "most valuable features," just as you do for online content from the Wall Street Journal. Want extra storage space for your Hotmail account? Please remit $12.95 annually.

There's a blog that chronicles all of this at http://theendoffree.com. It reports on the latest converts from "free to fee and beyond." If you read it every day, you can see the trend unfolding in real time, right before your eyes.

This was inevitable. None of the dotcom revolutionaries ever thought through the permission-advertising model that might have enabled "forever free" Web content. The Webmasters went with a broadcast-advertising model instead. White space on a Web page was filled with billboards that no one wanted or needed. The Webmaster's response to consumer indifference was to make the advertising ever more invasive, which made it ever more annoying. We have gotten to the point where "traditional" advertising on the Web is probably an exercise in bad brand management. And so the end of free content nears.

This trend, from free to fee, is emblematic of a more ominous development in the Internet arena. Bill Taylor, one of Fast Company's founding editors, calls it "the counterrevolution": mature companies in mature categories striking back at Silicon Valley technology and the pricing-power collapse that it implies. They are doing so in Washington, DC and in state capitols, where the technology crowd is weakest and most clueless. Their efforts are meeting with considerable success.

To understand what is happening, it's necessary to back up a few years. Back then, on Sand Hill Road, where the top venture firms met the top technologists, there was the sense that the work that they were engaged in represented the future. It was the future. Their technology would reinvent every business and shift the paradigm of every enterprise. And nothing could stop it or them.

They had no use for politics, no use for government, no use for the old rules. But it was more than that. They were openly disdainful of government regulation of any kind, and they didn't bother to hide their contempt. When the National Security Agency raised concerns about unbreakable encryption software, Valley technologists sniffed that their concerns were the product of old thinking. The whole nation-state thing was so retro. The digerati weren't really Americans, after all; they were citizens of a wider world. They were global technologists. They could sell to whomever they chose. And they did.

Just as their technology raised security concerns, it also threatened two established businesses in particular. The first was old-fashioned telephony -- the telephone business was the choke point of Internet technology. With billions of dollars of Wall Street cash, thousands of miles of information-superhighway fiber-optic cable was laid into the ground between major hubs. The problem was the so-called last mile: the wire into your home. Most homes were equipped with three wires: electric, telephone, and cable television. Most people connected to the Web over a standard phone line. Converting that line into a high-speed-access line was crucial to the success of all of the other Internet technologies that the Valley had to offer.

From Issue 61 | July 2002

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