More Adventures in e-Books

The second metaphor is one that has been doing the rounds in recent months in analyses of the collapse in the share price of telecommunications infrastructure providers. The investments by companies like Global Crossing and MCI WorldCom in creating huge networks of broadband fiber optic cable has been compared to the building of the huge network of railroads across America by a host of private companies spending money loaned them by JP Morgan and others at the end of the 19th century. Most of those companies went out of business, because the capacity created far exceeded demand: similarly by most calculations the utilization rate of the fiberoptic networks built in the past ten years is about 5 percent.

Although it took about three or four decades to reach a profitable level of utilization in the case of the railroads, the Online Computer Library Center (OCLC), a non-profit organization that provides computer-based cataloging and resource sharing to 40,000 libraries in 81 countries, has decided that netLibrary, the e-book reference and collection service for libraries and institutions, has an infrastructure worth about $20 million (based on what is currently known about the terms of the pending purchase of netLibrary by OCLC). This would suggest that here we have an instance of an infrastructure that, unlike Reciprocal's, is delivering goods to the right place. (Again, the matter of arguing why this is the right place I will also defer to the next column.)

Fear of hubris prevents me from saying that the bankruptcy happened because netLibrary spent (and was continuing to spend) too much money developing the infrastructure but I can make the self-evident observation that the company could not structure itself in such a way as to provide an adequate return to its investors; its capacity was underutilized. I believe that the OCLC will see a pretty good return on its $20 million; it's cheaper and faster than developing and beta-testing such a system from scratch. (Marketing will of course be rather straightforward since their market is their membership!)