Applications

Could Micropayments
Add Up To Real Money For ISPs?

ISPs connect subscribers to the Internet, but many are still searching for a way to make money from the content that traverses these connections. An Austrian developer may have the solution for turning content into commerce.

by Alex Goldman ISP-Planet Associate Editor [October 30, 2002]

Spend some time on the ISP-Lists and it seems like every service provider on the planet is trying to figure out a way to make money from content. But where is that alchemist who can turn content into gold?

An Austrian telecommunications and system integration concern called Kapsch has developed just such a billing system, which the company calls billiteasy. The system relies on an ISP billing its users, taking a cut, and passing on the rest of the money to content providers.

Wolfgang Hausherr, general manager of Kapsch's ISP Group, said the software development project was inspired by a "eureka" moment.

"We were on a bike trip and we needed very specific local weather information each day. We could only obtain the information by cell phone," Hausherr said. "After the bike trip, we contacted the weather information provider and asked them why they were not providing the same information over the Internet. They told us that on the Internet, they would not be able to charge for the service."

Hausherr said it quickly became clear that asking an ISP to bill its subscribers offered benefits to all parties concerned—both content and service providers.

"It's simple for the user, who does not have to establish credit with each content provider, and safe for the user, because no credit card information is transmitted." Hausherr said. "It's safe for the ISP, because the ISP incurs no CRM, marketing, billing, or interface maintenance costs."

The setup
The software installs on a server at the ISP's NOC. When a user requests premium content, the software displays a page informing the user of the price and asks for a confirmation that the user will pay for the content. The price of the content is added to the user's next monthly bill.

Kapsch set up a trial with Austria's second largest telephone company, United Telekom Austria (UTA). Kapsch installed its billiteasy system and built content alliances to supply premium content to 10,000 UTA subscribers.

Hauscherr said the test yielded surprising results.

"We started with 500 customers for three days to make sure the system was working," Hauscherr said. "The only unexpected result was that there was greater than anticipated call center volume, so we learned we needed to provide better information about the service. Then we switched on another 5,000 users, and a few days after that, the remaining 4,500 users."

The trial used six content providers, covering content from employment, news and entertainment sites, as well as a premium search engine service. Products ranged from jokes and horoscopes, to games and even erotica.

Hauscherr said that usage varied according to the category of the content.

"One category, information, showed relatively steady usage throughout each day, while the other category, entertainment, had sharp peaks, especially on weekends and during bad weather," Hauscherr said.

The billiteasy software was developed to run on a Sun Microsystems workstation such as a SunFire Unix workstation, and to use an Oracle database (making it easy to interface with most billing systems). An ISP must purchase a workstation and a database, but would not incur any additional fees for the software. Instead, the service provider sets up a revenue sharing deal, which varies according to purchase volume.

The GUI interface (above) for managing content providers and users is simple and intuitive.

In the trial, the lowest price charged for content was about 10 cents. Hauscherr said that the lowest price that would make sense is about 1/10 of a cent—the incremental cost of adding a single line to a monthly bill.

Hauscherr said that once the system is installed, service providers tend to find unexpected benefits.

"The gaming provider liked charging per-minute fees because although people were not willing to pay about $5 up front, they were willing to pay 10 cents per minute," Hauscherr said.

Hauscherr said that some service providers found they could design targeted service packages for users that would not normally have access to charge cards or other forms of online payment plans.

"We found that a large number of children do not have credit cards but want to buy things on the Internet, so we can allow parents to set a monthly limit, and allow children to surf the Internet without giving them a credit card that is accepted everywhere," Hauscherr said.

"In addition, service providers can limit total spending on an account, and can make agreements with content providers to give each user a monthly or annual credit (right) with any content provider," Hauscherr added.

So is this micropayment profit sharing package right for your ISP business? Hauscherr says that providers need to be mid-sized or large ISPs in order to recoup the costs of the database and server. But who knows? Perhaps small change just might add up to be the start of something big for your ISP business.

— End