Uncooperative Consumers Screw Up Corporate Innovation

"but the problem is, those people don't want to pay for it.''


Online billing, an idea that looked like a winner, has held its own but has
not caught on in a big way.

Bob Tedeschi.  New York Times
June 4, 2001.  p. C.8
Copyright New York Times Company

AMONG all the half-baked Internet ideas that made it onto investors' plates in
recent years, online billing was one of the few that seemed to offer some real
nourishment.

Here, after all, was a technology that promised to save time and money for
consumers and the companies that bill them, while giving a potentially valuable
new service to banks and online portals like Yahoo and MSN. And it created a
business opportunity for new types of e-commerce companies like Checkfree,
Spectrum and Transpoint, which provided the portals and bank sites a way to let
customers view and pay multiple bills.

That was the theory, at least. But the so-called e-billing category is still
mainly a frog, waiting for consumers to kiss it and turn it into something
charming.

According to the Gartner Group, the technology consulting firm, only about
three million of the nation's estimated 130 million Internet users use the
Internet to pay any of their bills -- and most of those customers still receive
the billing statement on paper through the mail. A far smaller number, about
100,000, actually go to a single Web site to view their incoming bills and
electronically pay them, according to Gartner.

Already, Transpoint, which was backed by Microsoft, First Data and Citibank, is
a thing of the past, having been swallowed up by Checkfree last August for
about $1.3 billion. And Spectrum is still rolling out its services. In light of
such underwhelming activity, some analysts are beginning to question the basic
logic behind the business plans of the e-billing companies.

''Things aren't necessarily bleak for online bill payment,'' said Susan Landry,
research director at Gartner. ''But it may be rather bleak for companies
looking to make a business out of this. The way things are structured right
now, it's a losing proposition.''

Ms. Landry said that while Checkfree and other so-called online bill
consolidators must charge for their services, the banks and online portals that
pay the consolidators cannot necessarily pass on those costs to consumers.
Consumers are loath to pay an extra fee for the privilege of seeing and paying
their bills, Ms. Landry and other analysts said, no matter how convenient it
may be to do so online.

As a result, banks and portals have offered the service, but have not yet
advertised it widely. ''Banks don't want to charge their best customers for
this, because they don't want to risk losing them,'' said David Easthope, an
analyst with the investment bank Friedman, Billings, Ramsey. ''They end up
charging people who aren't their best customers $5 a month, but the problem is,
those people don't want to pay for it.''

Yahoo, which was the first portal to offer online bill payment, in late 1999,
does not charge customers for the service, hoping instead to make money from
advertising and from luring users to its paid financial services. So Yahoo,
which would not disclose how many people use the feature, absorbs the fees
charged by Checkfree.

Without discussing the specifics of the Yahoo arrangement, a Checkfree
spokesman said the company's fees typically included a $75,000 set-up charge,
plus a monthly fee of about $4 per subscriber. Another Checkfree customer,
Microsoft's MSN, charges users nothing for the first three bills they pay;
beyond that, the fee is $6 a month.

Ms. Landry said that she expected most consumers to choose not to view and pay
all of their bills at one site, and opt instead to go to each biller's site
directly. And in a few years, technology may enable a consumer to set up a
software ''agent'' that will assemble ''all the information on who you pay, how
you pay them and when, and will romp around the Internet on your behalf,'' Ms.
Landry predicted. ''Why would you need a consolidator when you had that?'' she
added.

Others, though, are not ready to give up on the consolidators. ''It may be that
we see the customer base grow by 5 percent a year, and we never see a big
break-out year,'' said Mr. Easthope, of Friedman, Billings, Ramsey. ''But we
probably will see mass adoption.''

Investors seem to share that optimism. Checkfree's market value of $3.36
billion is nearly twice that of Travelocity, Ariba and Doubleclick, just to
name a few other types of e-commerce companies. Checkfree's shares closed at
$38.76 on Friday, well above their 52-week low near $24 in early April.

The billing consolidators and billers are not the only ones waiting for
customers to warm to the idea of clicking through their monthly statements.
Consider Billserv, which takes a billing company's paper bills and converts
them to a form that can be posted on a Web site. Billserv's clients, which
include Chevron, AT&T and dozens of other companies, send out 15 percent of the
20 billion bills produced in the United States each year, said Michael R. Long,
Billserv's chief executive.

BillServ receives 30 to 40 cents for every paper bill it posts on a Web site.
But so far, less than 2 percent of its clients' bills are handled this way.

''We're actually much farther along than I would've anticipated,'' Mr. Long
said. ''But we really would like to see those adoption rates kick in.''

Mr. Easthope, the Friedman, Billings analyst, predicted that the e-bills market
would benefit from -- among other forces -- increasing competition by Spectrum,
a consortium of banks including Wells Fargo, FleetBoston and J. P. Morgan
Chase. The competition could bring about better financial terms and product
features, he said, making it more attractive for billers to aggressively market
these services.

He said that at least one bank, Bank of America, planned to step up advertising
for its online billing feature. Bank of America and Checkfree said in April
that they would jointly commit $45 million over the next two years to advertise
online billing. Linda Mueller, a Bank of America spokeswoman, said the company
charged a typical customer about $6 a month for the service, which began
nationally in February.

Ms. Mueller would not say whether the company made or lost money on its
Checkfree service. But she contends that customers are willing to pay for it,
because the price equals the amount a consumer would spend on postage for about
18 checks.

But that math might not convince would-be customers. The average consumer
receives 12 to 18 bills a month, but only 275 billers are sending their bills
to Checkfree each month, said Peter Sinisgalli, Checkfree's president. That
means that the average consumer can receive only four or five bills today
electronically, Mr. Sinisgalli said, ''although our goal is to push that to 10
or more by the end of the year.''

Many utility companies, trash collectors and other companies, meanwhile, have
been somewhat slow to offer their bills online -- whether through their own Web
sites or through a site served by one of the consolidators. Ms. Landry, of the
Gartner Group, said of online billing, ''Billers hate it.'' Setting up an
online billing system is not only costly, she said, but can clutter the line of
communication a biller previously had with its customers.

But some billers are much more enthusiastic. George McGrath, senior vice
president of Norcal Waste Systems, a trash collection and recycling company
based in San Francisco, said he was ''truly excited'' about the company's
online billing system, even though just 28,000 of his 400,000 customers use it.

Mr. McGrath said his customers can view and pay their bills on Norcal's Web
site for no charge. In the future, he said, those customers will also be able
to do so on another Web site affiliated with Spectrum, although that might
entail a service charge. Mr. McGrath would not disclose how much the company
spent on the online billing system, but he said that online bill processing
cost half as much as traditional bill processing, given the expense of
printing, mailing and handling paper bills.

Mr. McGrath said customers had also responded favorably to a feature, rolled
out last month on his site, that automatically debits their checking accounts
when their bills come due, and then notifies them by e-mail. ''They're telling
us, 'We don't want to go into your site; just take the money and let us know
you're doing it,' '' Mr. McGrath said. ''So that's what we're giving them.''

___________________________________________________________________________

6/28/2005
Big contributors to GOP reap big post-election rewards
By Jim Drinkard, USA TODAY

WASHINGTON - Just six months into a new term for
President Bush and the Republican-controlled Congress,
some of their heaviest donors are scoring victories on
the legislative and regulatory fronts.
From rewrites of the laws governing bankruptcy and
class-action lawsuits to relief for oil, timber and
tobacco interests, GOP supporters who gave millions of
dollars last year are reaping decisions worth billions
from a Congress with more Republicans.

"Clearly, the election outcome has helped," says Bruce
Josten, executive vice president of the U.S. Chamber
of Commerce. "We are heading in the right direction. A
lot more has been done by this time in a new session
than usual."

While much public attention has been focused on Bush's
sputtering effort to sell an overhaul of Social
Security, legislation long sought by the GOP and its
business allies have been enacted with bipartisan
support. In February, Congress passed and Bush signed
a bill that sharply limits class-action lawsuits. The
savings will likely come to several billion dollars a
year, says Russ Sutter of Tillinghast-Towers Perrin,
an actuarial firm that studies tort costs.

The business sector that includes manufacturing and
retail was among top GOP donors last election cycle.
It directed three of every five political dollars to
Republicans--almost $121 million, according to the
non-partisan Center for Responsive Politics.

There was a similar partisan tilt in political giving
by the finance industry, which won passage in April of
a law making it harder to erase debts by declaring
bankruptcy. Credit card companies and banks sought the
change as a way to collect more debts.

The finance sector gave nearly $195 million to the GOP
in the 2004 elections. And 105 of Bush's 548 elite
fundraisers--those who raised $100,000 or more--were
from the world of finance, making it his biggest base
of top-dollar support, at $34 million.

"Many of the traditional business supporters are
really getting the agenda they wanted, and it seems to
be speeding up," says Larry Noble, director of the
Center for Responsive Politics, which studies the
impact of money on politics.

Still to come: Congress is pushing to complete an
energy bill. Business interests want limits on
liability for water contamination caused by MTBE, a
fuel additive designed to reduce auto emissions, and
oil companies seek to open the Arctic National
Wildlife Refuge to drilling. The Senate passed its
version Tuesday.

Bush supporters also have had good luck outside the
legislative arena:

--Justice Department lawyers this month abruptly
scaled back their request for a penalty in the
government's lawsuit against tobacco companies. Rather
than the 25-year, $130 billion smoking cessation
program their own expert had recommended, they are
asking for a $14 billion remedy. The tobacco industry
favored Republicans three-to-one over Democrats last
year, giving $2.7 million to the party and its
candidates.

The Justice Department's Office of Professional
Responsibility is looking into whether politics
influenced the decision.

--After Securities and Exchange Commission Chairman
William Donaldson resigned under fire from business
groups who complained about overzealous regulation,
Bush replaced him with someone with a pro-corporate
record: Rep. Christopher Cox, R-Calif.

"It's hard to imagine somebody with a more nakedly
deregulatory agenda," says William Lerach, a trial
lawyer who has brought shareholder lawsuits against
corporations accused of securities fraud. Securities
and investment firms gave $47.8 million to Republicans
last election.

--The administration last month reversed a ban on road
construction, timber harvesting, mining and energy
development on undeveloped national forest land. The
government also has expanded oil and gas development
on federal lands, including areas in New Mexico and
Wyoming.

Energy and natural resources interests gave $39.3
million to the GOP last year, three times the amount
given to Democrats.