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Reprinted from the Mercury News, 4/10/94

GROUP AIMS TO INTRODUCE BUSINESS TO THE INTERNET 

By DAVID BANK 
Mercury News Staff Writer

FOR entrepreneurs who are seeking to create an electronic marketplace for
Silicon Valley businesses to buy, sell and pursue profits, the creators of
CommerceNet have a distinctly un-capitalist marketing plan for their key
technology.

They're giving it away.

When CommerceNet, the first large-scale trial of electronic commerce over the
Internet, goes on-line Tuesday, computer users finally will have a secure way
to make payments, send confidential documents and verify the identity of the
person or company at the other end of the e-mail message.

That security system is the key to unlocking the commercial potential of the
Internet, the network of computer networks that connects more than 20 million
users, said Jay Tenenbaum, chairman of Enterprise Integration Technologies in
Palo Alto, which is leading the CommerceNet effort.

CommerceNet is working to overcome the other obstacles that have prevented
the Internet from becoming an accessible, full-service network for business
and the general public. These include the lack of an easy-to-use interface,
high prices for the high-speed telephone lines needed, and widely varying
standards and systems that make true collaboration difficult.

As solutions to those problems are found, Tenenbaum predicts, CommerceNet
will revolutionize the way business is done. CommerceNet's promotional
literature blithely lists as one long-term impact the disintegration of
vertical companies.

''This is monopoly busting,'' Tenenbaum said. ''We think there will be an
immediate, demonstrable edge in competitiveness for the companies that are
participating.''

In Tenenbaum's vision, large manufacturers will be able to quickly put their
orders out to bid, driving down costs. Small businesses that develop a needed
new service will be able to compete with industry powerhouses, because the
cost of distributing their products electronically will be, essentially,
zero.

Participating companies, initially, include Lockheed Missiles and Space Co.,
Hewlett-Packard Co., Digital Equipment Corp. and National Semiconductor Corp.
One new business already has been created on CommerceNet: the Internet
Shopping Network, a computer buying club based in Menlo Park that will be
launched at the same time CommerceNet is introduced at Santa Clara's
Techmart.

''We couldn't do it without CommerceNet,'' said Randy Adams, president of the
Internet Shopping Network, who estimated the cost for each sales transaction
over CommerceNet at 20 cents, compared to $5 for an 800-number telephone
order. ''Our costs are the lowest anywhere because of the way we leverage the
Internet.''

Many companies already use private electronic networks to communicate with
their suppliers or collaborate with strategic partners. But such networks are
expensive, exclusive and require prior arrangements to ensure smooth
interconnections. For example, Ford Motor Co. requires its suppliers to use a
particular computer-aided design program for the transfer of specifications
and blueprints. If the supplier also wants to sell to General Motors Corp.,
it may need a different system.

CommerceNet's goal is to bring the capabilities of the private networks into
a public network, so that any business or individual can participate in the
competitive marketplace spontaneously, without prior arrangements. Unlike
commercial on-line services such as America Online or Prodigy, CommerceNet is
an open marketplace. Anybody with a computer ''server'' can create an
electronic storefront, or ''home page,'' which will be included in
CommerceNet's directory.

At first the home page will be little more than an electronic brochure of a
company's products or services. Then, catalogs will be added. With the
ability to send and receive electronic payments, orders can be placed and
filled.

Soon, bids will be requested and received electronically. Services will
develop to search for and compare prices in various catalogs. The need for
other services, such as banking, brokerages and specialized directories will
create opportunities for new businesses.

But to create these opportunities, CommerceNet decided it had to seed the
marketplace. Some of the work already had been done by others. For example,
CommerceNet will rely on free software known as Mosaic, which gives Internet
users a relatively simple ''point-and-click'' way to navigate among thousands
of information providers. With its ''hypertext'' functions, Mosaic allows
browsers to click on key words to receive more information.

To make Mosaic secure, CommerceNet struck a deal with RSA Data Security Inc.
in Redwood City for the use of RSA's ''public key'' encryption technology.

In simple terms, the technology enables a sender to encode a message in a way
that allows only the intended recipient to decode it. At the same time, the
recipient of a message is able to verify the identity of the sender. 

In addition to payment, the security system enables companies to enter into
legal contracts with ''digital signatures,'' to control who sees proprietary
trade documents, and to use electronic letters of credit for financing
purchases. 

''Everybody's worried about whether the Internet can be made as secure as the
phone system,'' said Allen Schiffman, the principal architect of CommerceNet.
''Well, with this, we can do much better than the telephone system.''

CommerceNet is able to give away the security system in part because it has
already been paid by the government, in the form of a three-year, $6 million
matching grant from the Technology Reinvestment Program, which supports
projects that aid in the transition from a defense-based to a civilian
economy. CommerceNet will share its lessons and technologies with other
communities that are planning similar efforts, including Boston, Austin,
Texas, and Champaign-Urbana, Ill.

The CommerceNet team also includes BARRNet, a regional Internet provider, and
Stanford's Center for Information Technology. The project is sponsored by the
non-profit Smart Valley Inc., which is pushing high-speed communications
networks as the way to revitalize the local economy.

The state of California put in $500,000, and companies that want to
participate in the governance of CommerceNet are expected to contribute
$25,000 eachin cash or services. 

But companies that want to enter the CommerceNet marketplace need not pay
anything beyond the cost of their own hardware. CommerceNet will provide
starter software and technical assistance for free to those who want to
engage in electronic commerce.

IF YOU'RE INTERESTED

For information about CommerceNet, call (415) 617-8790, or send e-mail to
info@commerce.net