Information Society and the Consumer, by Karl Kollman

Figures to be added later. Posted by Sherman Hanna with permission of Karl Kollman. For reproduction in any form, please contact Karl Kollman, Austria

IMSN (International Marketing Supervision Network) OECD – Consumer Group,

Baden 7.6.1996

Brave New World …

In connection with the so-called “information society” of the future, the “multimedia future” that
is facing us, many promises have been and are being made to the consumer.

These range from an inconceivably wide and colourful range of TV programmes (sometimes,
there is mention of as many as 500 TV channels), video on demand (i.e. movie or TV films at the
press of a button), interactive teleshopping (you can order the wonderful world of consumer
goods by the press of a key from your living room), telebanking (bank transactions, such as
money transfers, from home), radiophony for everyone (everyone can be reached on his
personal radiophone at any time, regardless of where he is), the electronic purse (you pay with
a chip card instead of bank notes and coins), teleworking (you work in your home environment,
with all the many advantages for the employee), right down to the “global village”, i.e. a state in
which all citizens of the world can inform each other about anything at any time, and where the
globe becomes a transparent and extremely communicative village.

The suppliers, in particular those in the electronics and media industries, multiplied a
hundredfold by excited reports from rather subjective journalistic perspectives, are never tired
of bringing the advantages of this electronic future, this information society, home to the

One of these advantages is the increase in jobs in the information society that is frequently
conjured up. There is talk of ten million new jobs through multimedia and telematics within the
next ten years in the European Union, and in Germany alone there are supposed to be 1 to 2
million new jobs.

Consumer Structures

However bountiful these things may sound in the published proclamations, the development for
the consumer, in the private households, will look slightly different. In summary, there are
basically three problems that the consumers will be – or are already – faced with.

The first major trend is a decrease in the income available for spending for major groups of

A second strong trend is a shift in performance from the public sector to the market economy,
or even to the households, in a number of areas.

The third major trend, unlike the first two “material” developments, is more of an immaterial
matter – let us call it the “dematerialisation” of objects and of personal benefits for the time

These three major development trends are to be investigated in more detail in the following –
this will then, I believe, lead to a series of problem areas that make this often euphemistically
described “information society” appear in a rather different light.

Trend 1: The income available for spending is on the decline

If we look at the distribution of consumer spending in private households and its development
in recent years, it is conspicuous that two areas of consumer spending have risen continuously
and clearly compared with the others. These are the costs that are spent on housing, and the
costs that are (have to be) spent on mobility, i.e. transport.

There are good reasons for this, which lie with the individual consumers themselves on the one
hand, and also in the supply structures and in our world, on the other hand. Undoubtedly many
households have made efforts to improve their quality of living, i.e. to live in larger, more
pleasant apartments and in areas with less environmental or traffic impairment.

The situation in terms of mobility is similar. The number of households that own private cars
has increased continuously, and to have two cars in one household is still a mobility goal for
many, that is undoubtedly linked with the fact that more women work. These desires for better
housing and more individual mobility – which are often closely linked – are juxtaposed by
drastically rising costs of housing, however, which are due not only to the costs of
construction, but also the increasing shortage of good residential areas in our European cities,
of course.

Moreover, the attraction of the cities (and their surroundings) is still quite effective. Work,
entertainment, shops are simply located in the cities, and the rural areas are therefore being
constantly drained.

It is clear that this development will not end soon, that the expenditures for housing and for
individual mobility will continue to rise. Since, on the other hand, a marked income growth can
hardly be expected for the majority of consumer groups in view of an economic decline in
Europe and in the course of the public spending cuts introduced in many countries, this means
that the scope for other expenditures than housing, energy and transport will, of course,
decrease accordingly.

This means that many large consumer groups will have little scope for the purchase and the
operation, the use of new information and communications technology. It should also be clear
that the use of multimedia, i.e. the new communications technologies mentioned in the
beginning, will not be free of charge, that the necessary hardware will have to be purchased,
and that the operating costs, the costs of using them, will often be even higher.

Available Time?

As far as the time available to the consumers is concerned – and of course time is just as
necessary for the use of these new communications technologies as the available financial
means – the situation is not as rosy as you might think at first glance. The talk of a future
recreation society is obviously false, if you look at how people use their time.

In terms of how much time is spent on various activities by the Austrians, for example (the
situation is quite comparable with Germany), the share spent on work has increased slightly on
average over the last decade, as has the share of time spent on household work, whereas the
amount of time spent on recreation has decreased. Thereby, it is conspicuous that the activities
in this reduced leisure time have shifted more towards passive forms of recreation. The amount
of time spent on social contacts has declined by about half an hour, and the share spent on
“watching TV” has increased accordingly 1 See ÖSTAT (Austrian Central Statistical Office, ACSO) (Ed.:) Use of Time 1992/1991,
results of the March/September 1992 and September 1981 Microcensus, Beiträge zur
Österreichischen Statistic Vol. 1171, Vienna 1995..

In addition, people are obviously not looking forward to the multimedia age with very much motivation, they view
the new communications technologies and the information society with some scepticism. The large majority of the
population, and in particular the groups aged 30 and over feel overtaxed, are afraid of becoming lonely – this is
expressed by about half the people aged over 30 -, and about one third of this large consumer group does not really
want this new, diverse media supply. 2 Horst W. Opaschowski: Medienkonsum. B.A.T. Freizeit-Forschungsinstitut, Hamburg

Trend 2: Deregulation and Privatisation of the Welfare State

In the European countries, a development has set in during the last few years, which aims at
reducing government interest and collective economy under the motto of “deregulation” and

Especially under the leadership of the standards set down by the European Union, rather than
triggered by individual initiatives (if we disregard Great Britain), there has been a shift of
national or public sectors (e.g. post, telecommunications, railways, etc.) towards market
economy. This is made palatable to the public with the prospect of more efficiency, more
competition and thus more or less automatically lower prices. However, as the privatisation of
British telecommunications has clearly shown: the true winners are, in fact, the major corporations.

Let us look at another area in which there is a shift from “collective activities” to the market or
households. For this purpose, we must turn to the so-called economic triangle. 3 See Scott Burns: The Household Economy, Boston 1975. All societies or
states have three economic areas of quite different importance in the course of history.

On the one hand, there are the private households, in which – as the use of time mentioned above clearly shows –
quite a considerable amount of economic creation of value takes place. The raising of children, laundry, preparation
of meals, in other words the classical household work, which has been continuously degraded by society in the
course of the last years and decades (with the exception of one area, the so-called DIY area), adds about half as
much value again to the national product created by the official economic system.

The second area is the collective economy or social economy, in other words the goods and services supplied by the
public sector (namely: transport infrastructure, school system, health system, etc.).

And last but not least, the third economic sector is that of private or commercial production of goods and services,
the market economy, where consumers are offered goods and services for money.

The distribution of these three economic areas, i.e. the decision which goods are to be produced where, is generally
determined by national activities. The government – or, in modern democracies, the individual citizen by majority
vote in the multiparty system – decides whether the school system is to be public or private.

However, in Europe many sovereign decision-making opportunities have been shifted to the European Union,
whose directives now provide for the sovereign implementation of a reduction of the collective area.

Such a reduction of collective services means that those services that are no longer provided by the public sector
must either be purchased on the market, or provided by the individual household itself. A typical example of this
is the reduction in the school and education system. Both in Austrian and in Germany, private extra tuition is
required by some 20% of the pupils, the reason for this being that the public school system has obviously not
extended or has even reduced its range of services. 4 For example, in Austria the number of lessons per week and thus the scope of supply is
being reduced in the 5th, 6th and 7th year of school education, in order to cut public
expenditures. Households with a certain income can purchase the
services not provided by the school system on the market, i.e. from the private tutor;
households with a lower income can only offer their children poorer educational opportunities,
or they must provide such private tuition themselves. This is precisely what is meant by the
theory of a performance shift back to the households. A number of developments point in this
direction: on the one hand the reduction of socially effective transfer benefits, and on the other
hand the failure to implement the right regulating measures, leading, e.g., to more eco-work in
the household (recycling) or to more consumer work (because goods are not duly marked and
therefore shopping is more difficult).

Lack of Technology Control

Although there is currently a shift in performance from the public sector to the market and back
to the private household, on the one hand, there has also been a “national failure” in the field of
social control of technology and economy for a long time.

Our modern societies and democracies 5 See, for example, Helmut Willke: Transformation der Demokratie als Steuerungsmodell
hochkomplexer Gesellschaften, in: Soziale System 2/1995, pp. 283-300 are no longer in a position to provide a socially
compatible control of technology and economy via the institutionalised system of politics.
Politics have only a superficial influence on the phenomena and developments of the market
and of technology. They no longer have an essential design function, whereby we must ask
ourselves to what extent this ever functioned any better anyway. Examples for this lack of
influence can be found in the field of nuclear engineering, genetic engineering and the media
industry. Complaints about “commercial television” are, if you take a closer look, really
complaints about lack of political involvement – and quite right in terms of the binding social
values existing in the educational system.

In fact, the currently common economic control of engineering and economy always contains a conventional
economic valuation in terms of a very simple mainstream economy. The effects on the consumer, the environment
and the society in general are hardly noticed, and far less anticipated; a comprehensive engineering valuation does
not take place. On both the national and the European level, politico-economic arguments restrict themselves
basically to economic growth and the safeguarding of locations. This is what makes the overheated market
dynamics that have become such a problem today not only in terms of consumer policy, but also in terms of
environmental policy, possible.

3. Trend: The “dematerialisation” of objects and individual benefits

From the perspective of consumer policy, we modern consumers live in an abundance of
supply – in Austria, for example, more than one thousand colour TV models are available on the
market, in Germany more than two thousand. The range is growing constantly, the speed of
innovation, i.e. the rate at which new models come onto the market, has clearly increased, but
the individual products differ from each other less and less.

The service value, i.e. the material benefit, the material quality of a product is no longer the
important dimension. It is the so-called added benefit, i.e. the life style and perception patterns,
symbols and attributes that are applied to a product by marketing and advertising, and which
need not necessarily even have anything to do with the material product itself, that matters.

This is also shown quite clearly by the cost structures of consumer goods. The lion’s share of
the price is no longer incurred by the material production costs, but by the costs of distribution.
In other words, advertising, marketing and physical distribution of the product from the
producing company to the consumer.

This replacement of material service value by immaterial added benefit is a form of
dematerialisation of goods with which we are dealing in our modern consumer society. Let us
look at the new communications technologies again. In connection with the new technologies,
there are mainly three developments that also have to do with “dematerialisation”.

These are:

the digitalisation of money,

the digitalisation of documents, and

the phenomenon that only user rights are sold instead of products.

Electronic Cash

The introduction of the so-called electronic purse and electronic money in the on-line services
(INTERNET 6 For the time being, the term “on-line services” here refers to all commercial on-line
services and services provided by the INTERNET.) will be the last stage of dematerialisation of money.

The first form of this dematerialisation was the possibility to pay by cheque and cheque card, to transfer money
directly instead of paying with bank notes and coins – at least the transferred amounts were still written down -, and
credit cards (debit cards) and their electronic payment forms (e.g. at point-of-sale terminals, which you only have
to draw the card through and press a few keys) presented the next step of this dematerialisation. The electronic
purse and electronic money (“cyber cash”) will complete the devisualisation of money.

Here, we must bear in mind that it is important for the individual consumer to have a visual, practical measure for
the money that he spends. After all, most people sell their knowledge, skills and qualifications on the labour market
for money; money is a scarce medium which we must use cautiously, since the personal desires, needs and
requirements depend on how much is available – much must be done without if we do not have enough money. The
consumer’s planning skills in spending the available money are not very good today, anyway 7 See, for example, Karl Kollmann: Konsumenten ’92, Vienna 1993.: people who pay
for too many things in dematerialised form risk losing track of what they are spending 8 See much earlier: David Caplowitz: The Poor Pay More: consumer practices of low-income families, New York 1963.. Where
money is spent in digital form only, i.e. without paper and handwriting (signature), this
intransparency will increase even further.

Digitalised, invisible documents

The shift from written information, from documents, to invisible digitalised forms, as has
already been introduced with the social insurance card in Germany, creates a problem for man.

This not only refers to the issues of personal availability of or ability to use information, i.e.
what we mean with the term “informational self-determination”: that the individual determines
which information about himself is to be disclosed to another person. The loss of written
documents in favour of those in digitalised form will change the way we handle information in
many respects, right down to the visualisation of personal identity.

Replacement of product purchase by user rights

The sale of the right to use a product – in the direct, pragmatic sense – is nothing new. We are
all familiar with the possibility to lease a car instead of buying it, even if this is regarded with
some scepticism from the consumer’s point of view 9 See Karl Kollmann: Möglichkeiten für “Schlanken Konsum”? in: Journal für Sozialforschung, 34, vol. 4/1994, p0. 317-331.. In terms of environmental policy, the
purchase of user rights instead of the product itself (for which the supplier’s responsibility
more or less ends when it is removed from the shop) could certainly be an interesting option in
the field of hardware, i.e. technical appliances, if we can succeed in achieving a better
manufacturer’s responsibility and, for example, closed product cycles.

Let us return to the new communications technologies. What do we have to expect here?

Pay-per-use instead of subscription

The media offers of the future will no longer reach the consumer as complete units or
packages, but will have to be paid for according to individual use. This means: the product
purchase, the subscription, and the free and individual use thus offered, as in the purchase of
a book, in national broadcasting (monthly fee), the subscription of a daily newspaper or the
purchase of a video film, will be replaced by the purchase of user rights (pay-per-use of pay-per-view).

In some media, this is already the case, as for example with the telephone, where you pay for
units (and distances) in Central Europe – although there are other systems, too, as in the USA,
where local calls are included in the basic rate. The pay-per-use system is also applied to value
added telephone services (typically partylines and sex telephone services).

If such pay-per-use tariffs are also applied to television and electronic magazines, this will not
only change the way products are used drastically, i.e. create strong selection effects according
to “mass taste”, but will also lead to problems in the planning of expenditures by the consumer.
Take, for example, the phone bill: It is not easy to keep track of the running costs, and we all
know how our own feeling for time can vary depending on the situation. 10 Thereby it would be easy to solve this problem for the telephone, an integrated unit
counter would incur only a single cost of a few German marks.

New copyright legislation

The American report “Intellectual Property and a National Information Infrastructure” presented
in 1995, which has gone down in the current media policy discussions in the USA as the so-called “White Paper”, plans to introduce a new copyright law for the new communications

One feature of this new law is the pay-per-use system already mentioned. To show how this
system works, take the example of the traditional printed form of a magazine: You no longer
purchase a magazine, with which you can then do more or less what you want, namely: you can
give it away, you can lend it to someone else, you can even sell it again at half the purchase
price; you can read it all, or read only a certain article, or not read it at all… Such individual use
by the individual consumer is no longer possible, you pay for what you actually read (or call
up). And if you want to read a certain article three times because you liked it so much, then you
pay for it three times. As does any other person to whom the article is sent on electronically. He
must pay, too.

In future – according to the White Paper – copyright information is to be registered for all
electronic media contents not only in the form of a comment, but also in a “smart form” that
sends automatic use messages. In other words, if a friend sends you an interesting article
electronically, the relevant use fees will automatically be charged to you as soon as you look at

If realised in the USA, this new copyright law will also be realised in Europe sooner or later,
since such legal regulations are generally taken over on our continent. After all, grid searches
and wiretapping have also become reality in Europe; the cryptography ban according to the
American Clipperchip 2 solution, which has not yet been realised but will probably come sooner
or later, is already the subject of heated debate in the European Commission. The relevant
structures on which it can be based already exist in European copyright law (key word: duty on
blank tapes, photocopy tax, etc.). This new form of media use through purchase of user rights,
pay-per-use system, will not only affect media contents, but also programme software, for
example. It may be expected that the word processing software of the future will, one day, not
be purchased once by the consumer and then used ad lib. It will probably be provided free of
charge, and a user fee will be charged according to the number of pages or words written with
the programme.

On-line communications

Let us now take a look at on-line communications – what development trends are there in this
field, apart from those developments already mentioned?

Well, the emancipation hopes that many people have set in on-line communications, namely
that these will allow the individual, the user to become active himself (and not only to consume
passively) in terms of “consumer empowerment”, i.e. to put together his own media offers, to
become creative, etc., will hardly be fulfilled. If we look at the surveys on user behaviour in on-line communications, then the use is comparatively passive in many cases. Active discussion
contributions in Newsgroups and discussion rounds are realised only by a minority. 11 See, for example, Karl Kollmann: Neue Informations- und Kommunikationstechnologien
und Verbraucher, publications by the Institute of Technology and Warenwirtschaftslehre,
Vienna University of Economics, Vienna 1995. INTERNET: ftp://igw.tuwien.ac.at/pub/AK_Kollmann/kollm95a.zip

This is already the case with conventional forms of communications, but it will be enhanced by the increase in
graphic user interfaces in the Internet, and in particular with the so-called World Wide Web. The reason is clear:
WWW pages impress with graphic elegance, with design, and there is very keen competition between the offers,
which we also see in conventional media: anything that is experienced as more beautiful, better, more moving,
brighter, more diverse, is used. However, such beautiful offers cannot be realised by an individual person who
wants to communicate actively, or only at great expense. This leaves virtually only the passive use of professionally
designed offers; in other words, the coming years of the INTERNET will be characterised by increasing

Not only the media side, but also the technical side will lead to the primarily passive use of on-line offers.

The technical development of data transfer for the consumer is heading towards the cable modem, i.e.: in future, a
private INTERNET connection will no longer go from the personal computer via modem and phone line to the
Internet provider and thus to the INTERNET (as it does today), but from the personal computer (or even a PC with
integrated television) via cable modem to the cable television network. In other words, the television cable (cable
TV) will be used instead of the telephone line in future. These cable modems are based on asymmetric channels a
priori, i.e. the band width and the speed of the information flow to the consumer will be very high, whilst the
feedback channel, through which information flows from the consumer back to the information provider, will be
quite slow.

Unsatisfactory developments in terms of consumer policy

Generally, the developments in the field of on-line communications are very unsatisfactory from
the perspective of consumer policy.

For example, the EU Directive on Telesales, which provides for relevant protection measures for
“distant selling”, i.e. including on-line forms of distribution and teleshopping, is extremely
scanty. In particular, the field of financial services is excluded completely, issues of marketing
with the help of new communications technologies were not tackled at all. A whole series of
product groups has also been excluded.

Informational privacy, i.e. the individual’s right to self-determination as to which personal data
and information may be disclosed, is endangered by government measures and marketing

This applies not only to the cryptography ban already mentioned, but also to violations of
informational privacy by the authorities. For example, not only telephone calls and fax
transmissions into Germany or out of Germany are tapped by the German authorities, it also
applies to the attempts by the authorities to ban on-line communications (key word:
CompuServe and Sex Newsgroups). However, this affects not only on-line communications, but
also payment by electronic chip-card, where it will be possible to record all transactions and
draw up user profiles in future.

Furthermore, it is undoubtedly so that commercial forms of access to the new communications
technologies will widen the “knowledge gap” even further in future. On-line communication is
a very expensive business today.

The personal use of on-line communications for 10 hours per month (without hardware costs)
costs some AS 700.– per month (approx. DM 100.–) in Austria; in Germany, the situation is

In addition, this creates a series of very personal problems for the user.

On the one hand, individualisation will continue. This internalisation of costs – we have only
indicated the individualised cost distribution, the sale of individual user rights, here – may be
quite reasonable where ecological issues are concerned (e.g. distribution of the actual costs to
the polluter, etc.), but it ultimately fragments solidarity groups.

The form of use by the consumer that is prescribed by the provider undoubtedly leads to a loss
of autonomy. Consumer freedom in the use of services is thus restricted. The provider’s
possibility to control this individual use – it must be expected that various providers will quickly
join forces for better market penetration and more efficient marketing – will also be a problem,
since it creates a transparent, instrumentalisable consumer.

All in all, this will lead to an extensive economisation of the individual world of the individual
consumer, starting out from the passive consumption of an increasingly wide range, through
individualised cost distribution of the new forms of consumption (media offers), right through
to further instrumentalisation of the individual. In short: Ethics in the treatment of other
humans, of groups, of goods and services, will be replaced even more by individual cost-benefit analyses.