DATE=4/1-/02
TYPE=BACKGROUND REPORT
TITLE=THE ECONOMICS OF E-MAIL
NUMBER=5-51400
BYLINE=LINDA CASHDAN
DATELINE=WASHINGTON
CONTENT=
VOICED AT:
INTRO: Free E-mail may soon transform itself into "Fee E-mail." Linda Cashdan reports several major Internet portals like Yahoo and Hotmail, which have long subsidized E-mail for consumers, are now planning to charge annually.
TEXT: E-mail is a lot like telephone service in that the value of the technology increases as more and more people get it.
Syracuse University Information Studies professor Rolf Wigand says offering E-mail for free prompted hundreds of people to try it, which then caused thousands of their friends and acquaintances to join in.
He says today millions of consumers, himself included, feel they can not live without E-mail.
/// WIGAND ACT ///
I think any time you give consumers a chance to try something at no cost, little risk, it's certainly a factor why a particular practice may take off. Today if my boss told me we had to cut costs, I would say take my phone, but do not take my E-mail. It has become so crucial in terms of what I get done.
/// END ACT ///
But as E-mail has multiplied in popularity, Rolf Wigand says, the costs of providing it have multiplied too.
/// WIGAND ACT ///
A few years ago Microsoft bought Hotmail. At that time, Hotmail had eight-point-five-million customers. Today Hotmail has 110-million customers, and industry analysts think it costs Microsoft roughly a dollar a year to maintain each account, so just to maintain the account we are talking about 110-million dollars.
/// END ACT ///
Communications technology specialist David Ferris says Internet service providers first tried coming up with the money through advertising, then by charging for other services. Neither tactic has worked.
Essentially, he says, company shareholders have been subsidizing free E-mail.
/// FERRIS ACT ///
What is happening now is that the technology industry has had a year of shareholders rightly putting pressure on their management saying: "Look, we need you to generate some profits out of your operations." And that has caused service providers to look at ways of weaning people off free service for fee service.
/// END ACT ///
David Ferris says charging for E-mail should not diminish its popularity, because the charges will be small and because so many have become addicted to E-mail.
Indeed, he says, "Fee" mail might very well inspire new technological breakthroughs.
/// WIGAND ACT ///
If there are ways to make money, then you are gong to have all sorts of innovative start-ups trying to do new things, and people will invest in those things.
/// END ACT ///
On the other hand, David Ferris says, free Internet service has enabled many tiny businesses to thrive with very little overhead expense. (SIGNED)
NEB/LC/RAE