Payments make cents to Digital

Less than a penny for your thoughts?

That's the aim of Digital Equipment (DEC), which today announced plans to bring payments of less than a penny to the Internet.

Code-named Millicent and now being tested internally by Digital employees, the new payment system is designed for payments of between one-tenth of 1 cent to $5. Most so-called micropayment schemes on the Net now put a minimum of 10 or 25 cents on a transaction to cover handling costs.

Digital sees the plan as having wide appeal. "We think this will capture the imaginations of people," Digital spokeswoman Sarah Miller said.

But while Digital gushes about potential uses--ticking off a laundry list of applications spun from its collective imagination--other Internet payments companies are decidedly skeptical.

"First of all, we don't believe there's a significant market for subcurrency transactions," said Marc Briceno, an e-cash evangelist for micropayment rival DigiCash, which he said offers payments as small as 1 cent in a trial it's running with Mark Twain Bank. "Once business uses are developed, we will support them. But the demand would have to outweigh the inevitable consumer confusion."

The issues are not technical, other payment firms agree, but practical--nobody's clamoring to sell stuff for less than a penny over the Net.

But Digital sees pennies in the wishing well for its "electronic scrip" applications. The technology could be used to purchase movie previews, one song off of a CD, a horoscope, a cartoon strip, a real-time stock quote, ten seconds of play on a game, even intranet applications like metering usage of information systems or services so they can be charged to the right department.

"We have the technology in pilot with Digital employees behind the firewall," Miller said. Employees use Millicent to pay for information from Reuters news service, search engine Infoseek, and Tele Danmark, Denmark's public phone and telegraph firm. A major broker with international experience will be announced shortly, the company said.

This summer, Millicent will go into a public pilot test, with users given a certain amount of scrip to shop with before they spend their own money. But Millicent could make sense in the world of network computers, stripped-down devices that will need to download most applications on a pay-per-use basis.

Although other Internet payment players are handling transactions of $1 or less, most are adopting a wait-and-see attitude.

"We're not going to be the first, but as soon as digital cash makes sense, it's very easy for First Virtual (FVHI) to handle it," said Pierre Wolff, First Virtual's director of strategic planning. First Virtual charges a minimum 32 cents per transaction.

Bruce Wilson, executive vice president of CyberCash (CYCH), agreed: "It's no trick to handle transactions below a penny, but that's not the real world of viable satisfaction in consumer relations for most products and services. We currently don't see that the center of gravity of the real-world market is much below a quarter."

But Ira Machefsky, a senior industry analyst at Giga Information Group sees hope for the technology.

"Online publishers have found that people don't want to pay to subscribe, but maybe people are willing to pay as you read," he said. "There is a potentially huge demand for this product."

Digital's Millicent system uses distributed brokers rather than a centralized clearinghouse for transactions. Vendors contract with brokers to sell scrip to users. Brokers pay vendors as they sell scrip.

Verification is quick and automatic, allowing for fast, high-volume transactions. With other approaches, transactions must be cleared through a central point, adding costs and slowing execution.

In Millicent, for which Digital is seeking a patent, the user buys scrip from a broker with a physical-world payment, then buys information with a simple click of a mouse. A log in a Millicent electronic wallet tracks the value of scrip remaining.