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