New Billing System Allows Internet Shopping for a Dime

THE global web of computer networks known as the Internet is about to become host to a new concept in commerce: the digital dime.

New software from researchers at Carnegie Mellon University will allow Internet users to send companies electronic ''money'' in amounts as little as 10 cents. This advance called NetBill, announced here at the university yesterday, could create new business opportunities for electronic publishers, researchers say, that aren't possible with today's payment technologies.

''Maybe you want to sell music by the song. You can do that with this system,'' says Doug Tygar, computer-science professor at Carnegie Mellon and co-leader of the project. ''Our hope is that it will cause lots of interesting information to flow over the network from large publishers but also micro-merchants.''

These small merchants could be anyone from sound-effects creators to newspaper columnists who want to sell their creations directly over the Internet for a low fee.

Such low-fee electronic purchases aren't possible today because the transaction fees are so high. A single credit-card transaction, for example, might cost a minimum 25 cents plus 2 percent of the total purchase price, Professor Tygar says. Carnegie Mellon's NetBill system reduces that cost to about a penny.

''We haven't delivered the penny yet,'' cautions Bill Powar, a vice president at Visa International Inc., which is working with Carnegie Mellon to make the system work commercially. ''If we do things right, we'll come close.''

Initial tests of NetBill will take place starting this summer with university libraries, including those at Carnegie Mellon, the Massachusetts Institute of Technology, the University of Illinois, and the University of Michigan. The system will allow these libraries to charge users who tap into their databases to download journal articles for, say, 10 cents per page. The libraries would get to keep nine cents per page of that transaction.

The experiment fits neatly with the Clinton administration's push for a National Information Infrastructure. Digital libraries and electronic publishing are two of six national challenges that the federal High Performance Computing and Communications Program has been pursuing. After several months of testing, NetBill will be rolled out commercially. Pittsburgh-based Mellon Bank is handling the transactions.

A big reason transaction costs are so low under the new system is that it does not have the same overhead that credit cards have.

''We've cut out a lot of the fraud,'' Tygar says. The information being sent and the transaction data are all encrypted -- scrambled -- and the code would be difficult to crack. Also, the system is geared to reduce customer complaints.

In a typical mail-order transaction, someone charges a purchase to a credit card and days later receives the merchandise. If it's the wrong size and the customer returns it, that raises the transaction cost. NetBill, by contrast, works like an over-the-counter purchase. Customers pay for something when they receive it. The likelihood of dissatisfied customers is far smaller.

To take advantage of the system, users will have to have access to a part of the Internet known as the World-Wide Web. This is a fast-growing, graphically based system in which users can point and click their way through reams of information. To begin using the service, users will have to set up an account and deposit an amount of money out of which they can send digital ''checks.'' A link with Visa will allow users to set up their accounts using a credit card.