Posted on: Tuesday, June 4, 2002

Tollbooths on the information superhighway

By James Bickers
Gannett News Service

Whenever you connect to the Web to download some tunes or check your e-mail, your PC exchanges information with other computers using a standard software framework called Internet protocols.

The names of the protocols and the way they work are largely transparent to casual Internet users, and there's no charge to use them because they're freely available for any company or individual to incorporate into their Internet products and services.

But now some companies that create Internet protocol software, such as Microsoft and IBM, are considering charging a small fee to use the latest protocols, which are designed to enhance the Internet's efficiency and security.

Such a move is tantamount to placing tollbooths along the information superhighway and eventually will affect the wallets of mainstream Net users, according to Internet industry observers.

In order to understand the Net tollbooth concept, you first must know a little about the transparent software that powers the surfing experience of every Net user.

Free now, pay later

Online transactions of any sort — from viewing a Web page to sending an instant message — are moved through a "stack of protocols," or a series of procedures that make sure the information arrives at its destination. A protocol is an agreed-upon standard that makes it possible for you to e-mail photos to grandma, track bids at an eBay auction or renew your driver's license online.

"For all of those things, from the top to the bottom, you don't pay a dime," said David Berlind, a journalist with technology Web site ZDNET (www.zdnet.com). "Nobody pays any money for supporting those protocols — they're royalty free."

Because protocols have acronym-laden names and confusing meanings, most Internet surfers don't realize they're using them, but some are so familiar that you probably use them everyday. For example, there's the http protocol, which is the standard by which computers exchange Web pages. You also might have come across the ftp protocol if you've ever built a personal Web site and used this standard to upload your site files or images to an online photo album.

Internet protocols are regularly created by large technology companies, such as Intel, Oracle and Sun Microsystems, and are distributed freely to any company or individual to use in products and services that work with the Internet.

Although the current protocol set is not likely to disappear, emerging protocols are compelling because they help to improve the online shopping experience and the security of digital signatures, for example.

But according to Berlind, who wrote an investigation about the potential consequences of Net tollbooths in April, the latest protocols could come at a price.

"What they're saying is, we've got this razor, and we'll give it away," he said. "But we'll charge you for the blades. And clearly, the razor's not very good without the blades."

The "blade" in one case, according to Berlind, is WS-Security, a specification created by IBM, Microsoft and Internet registrar Verisign. WS-Security provides methods for securing traffic across SOAP, an emerging transaction protocol, and would likely become a crucial part of upcoming online commerce systems, such as Microsoft's .NET. WS-Security, though, is not royalty free.

"IBM and Microsoft are clearly banking on getting the razor standardized, then later coming out and saying 'here are the blades — and by the way, those standards are useless without our blades,'" he said.

What's the practical impact of all this? Berlind says price increases on software and Internet services would be inevitable.

"Bottom line, if somebody who makes software that complies with a standard has to pay a royalty, it's only natural that they'll pass that cost along," he said.

In his investigation, Berlind reported on a new type of software license Microsoft and IBM are planning to use for emerging protocols called "reasonable and nondiscriminatory" terms and commonly referred to as RAND licensing.

Reasonable and nondiscriminatory licensing does not mean that the company in question will charge for the use of the product or technology under the license — it just means that they can if they choose to.

It's a nebulous and subjective definition, and that's precisely what scared Berlind.

"Nobody knows what RAND means," Berlind said. "There's no acid test for what reasonable is. Whose decision is that?"

Both IBM and Microsoft were quick to respond, offering assurances that there were no plans to charge royalties on SOAP or WSDL, another recent protocol.

"RAND and RF (royalty free) have become code words and are often oversimplified," said Robert Sutor, director of e-business standards strategy for IBM. "RAND does not imply that royalties will be charged and both can include other licensing conditions as well."

"There is currently no expectation that anyone is going to charge a royalty on WSDL, including Microsoft," said Michele Herman, director of Internet protocol strategy for Microsoft. But the company stopped short of saying that it would not at any point impose fees on technology used in Web services protocols.

"They didn't say 'You're going to have to pay us,'" Berlind said, "they just reserved that right."

Patent attorney Michael S. Neustel defends a company's right to derive income from Web technologies.

"There is a group of people vocally opposed to a fee-based Internet," he said. "However, would this same group of people be willing to donate just 5 percent of their income to a nonprofit group designated to create new technologies for the Internet? A majority would probably answer no, which begs the question why would they expect companies like Microsoft and IBM to do so."

Since Berlind first reported on the RAND license, Microsoft and IBM have changed their tune, and WSDL and SOAP are now completely royalty free.

But a specter has been raised, and many Net watchers are increasingly suspicious of how intellectual property and patents will be used in the future.

Ultimately, the debate over how to license and charge for Internet protocols boils down to the even more contentious area of software patents. Microsoft and IBM are able to choose their method of licensing because the technology being licensed contains one or more patents that they own.

"Whether or not Microsoft has traditionally used this model or not is irrelevant," said Berlind. "They're probably looking at IBM, who make $3 billion a year on their patent portfolio, and saying 'That's a good way to make money.' "

When it comes to technology, patents are tricky business.

In some cases, they are either difficult or downright impossible to enforce: for instance, IBM owns European Patent No. EP0417888, "Computer system with program installing apparatus," which describes the start-up procedure for practically every microcomputer in existence.

Although it would be hard to imagine a company trying to collect a royalty every time people turn on their computers, it's easy to see how patents on widespread procedures can lead to complicated issues.