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Wednesday, 9 January, 2002, 18:30 GMT
The internet in 2002
Nasdaq market site, located on Times Square, New York City
Technology stocks plunged in value last year
By the BBC's Dan Damon

Last year saw thousands of Internet company failures in the United States and Europe - victims, it seems, of an over-hyped vision of the digital future.

Investors lost tens of millions of dollars, and billions were wiped off the value of technology company stocks as the global technology market shrank for the first time.


I think we're going to see even more web security breaches in 2002, and more viruses and worms

Carl Schneider, editor of Computer Weekly magazine
So how can the web adapt to these difficult new conditions? And what are its prospects for 2002?

Internet sites have traditionally been free - depending on advertising for any revenue. Now users may have to get used to paying.

"We're getting towards the end of free services," said British computer journalist Jack Schofield.

"The internet wants to be free, and everyone wants everything to be free on the internet, but actually people have to survive and make money in order to offer these services."

New services

In return for payment, internet companies will have to offer more. Instead of simply trying to attract users, more sites will start to provide services.

Now that so many home computers use high speed microchips and have relatively more memory, US giant Microsoft is betting that users will pay for "web-service" - instant access to the latest software online.

"When you want to use something - for instance a word processor - the service magically appears," Mr Schofield said.

"When you don't want to use it, it magically disappears. So you don't have to look after your system.

"And Microsoft is the one company that can really build the next generation of web-service at this stage."
Young man in front of computer
More people are staying home and using the internet

But there will be many other types of initiative.

A service called MovieFix makes movies available for internet download. But the broadband (very fast, high quality internet connections) network that enables reasonable quality video on demand like this has yet to find an market.

Only 10% of American Internet users have signed up for the new high speed service. In Britain the figure is 1%.

Home video

But New York Times technology correspondent David Pogue said that the events of 11 September coupled with the shrinkage in the technology market are motivating people to save money by staying at home.

That means they will want more video on demand. And Mr Pogue believes that business executives too will want to reduce the amount of travelling they do.

"If I were looking for a job right now I think I would found a video conferencing set-up business," he said.

"I think there's a lot of small and large businesses who are thinking more seriously than ever about video conferencing.

"So instead of flying across the world to have meetings, they will do it at home in the boardroom with video conferencing."

Another web development that looks set to have a good year is internet telephony.

It only takes a local call to get onto the internet, of course. And now that can give a voice link to any other country.

Companies like Delta-Three, run by Naom Bardin in New York, take international internet phone calls and connect them into the standard telephone networks.

New voices

Mr Bardin said that this is especially useful in countries where phones are few and far between.

"One interesting phenomenon is internet cafes," he said. "They are in places in the world where the density of telephone ownership is so low that literally people do not have phone lines at home.


This collapse of the bubble...has given us the growing room for the next revolution

Paul Saffo, Institute for the Future
"Today, these cafes are beginning to add voice capabilities to their computers, making them not only internet cafes but voice cafes - places where you can come and make your phone calls as well as browse the internet.

"That's a very fast-growing segment especially in the less developed countries around the world."

Adding to the optimism of internet entrepreneurs like Mr Bardin is the fact that the governments of many developing countries are installing new high-speed wireless networks with the help of foreign loans.

Those systems leap several generations of communications technology.

Warnings

Carl Schneider, editor of Computer Weekly magazine in Britain, says that after all the fuss and drama of the dot.com bubble, he is still in a positive mood. But he does issue two warnings.

First, computer memory will get more expensive this year - the downturn has meant new silicon chip factories have not been built, so demand will outstrip supply.

And secondly, hackers and virus writers are getting more sophisticated.

"I think we're going to see even more web security breaches in 2002, and more computer viruses and worms (sophisticated viruses that reproduce)," he said.

"I think we might see the first in a series of wireless viruses. We haven't really seen any of these to date but with the growing number of wireless devices - hand-held devices - connected to the internet, I think we might start to see viruses appearing on these.

"And most of these devices at present have no anti-virus protection at all."

Wireless internet phones
Hand-held devices lack anti-virus protection
That is the bad news, but at least the internet's prospects now are brighter than they were 12 months ago.

Paul Saffo, of the Institute for the Future, a think tank in Silicon Valley, California, is so sure the internet is on the way up again that he is able to take a positive view of last year's bankruptcies and failures.

"This collapse of the bubble gave us breathing room in Silicone Valley," he said.

"All the things we need for innovation here - cheap office space, people available to start new companies, affordable housing, a little more space on the freeways - this has given us the growing room for the next revolution."

There probably will not be any huge fortunes to be made from the internet this year, but far fewer people are likely to become dot.com paupers.

And while many declared 2001 the end of the internet, 2002 might prove instead to be the start of a long period of solid development.

See also:

02 Jan 02 | Sci/Tech
Internet starts to shrink
26 Dec 01 | Sci/Tech
Expedition to the lost net
01 Dec 01 | Sci/Tech
High prices cost broadband dear
11 Feb 99 | Sci/Tech
Surfing on a matchbox
29 Aug 01 | Sci/Tech
Doing science by stealth
07 Nov 01 | Sci/Tech
New domains taking hold
17 Dec 01 | Sci/Tech
The net gets a new .name
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