AOL Shows a New Face - WSJ
July 30, 1999
AOL Shows a New Face
In Cable, Message Fights
By JASON FRY and TIMOTHY HANRAHAN
THE WALL STREET JOURNAL INTERACTIVE EDITION
TECH CEOs are on their best behavior when
addressing Congress, shareholders or what's-the-Net?
crowds on the lunch circuit: They smile and tell jokes
and preach about the wonders that emerge when
government leaves business to the free market and talk
how you, the consumer, are the one to determine whether
they live or die.
But let something get under their skins, and it's different:
The government needs to rescue them -- right this
moment -- and the consumer runs a distant second to
stroking the corporate ego.
At the moment, no company is behaving more
wretchedly in this regard than America Online Inc.,
which is having a corporate nervous breakdown over the
twin issues of open access to cable-TV lines and open
access to instant-messaging on the Web.
What makes that sad is that for years AOL's success has
been the poke in the eye that the digerati so sorely
deserve. AOL thrived by staying relentlessly focused on
offering people a simple way to get on the Internet.
Sneering tech poohbahs kept telling everybody that
"simple" meant "stupid." Any moment now, the hoi
polloi were going to wise up and decide it made more
sense to join some anonymous local ISP and mix and
match a shell account with their own browser and
plug-in software. Instead, people kept opting for a
straightforward way to get Net access: At last count,
nearly 18 million of them use AOL.
AOL also showed itself to be a foxy street fighter. In
March 1996, at the dawn of the browser wars, AOL
adroitly played Microsoft Corp. and Netscape off
against each other and emerged clutching a browser deal
with each. AOL users could pick whichever one they
wanted, and Microsoft and Netscape executives were
forced to wince and smile through the photo ops. And
then last fall, AOL won one for the common man,
acquiring a much-diminished Netscape and forging an
e-commerce alliance with Sun Microsystems Inc. Steve
Case and Co. had not only gone toe-to-toe with
Microsoft and survived, but also earned the respect and
admiration, however grudgingly given, of Silicon
Valley's rulers.
This should not be forgotten: Anyone who thinks getting
on the Internet shouldn't require an engineering degree
owes Mr. Case a huge thank you -- as does anyone who
hates being talked down to by the mansion class of
Woodside. But that being said, in recent weeks AOL has
shown a much uglier face, throwing twin tantrums about
issues that have put it on the opposite site of the fence
from consumers.
First comes the issue of open access to cable-TV
systems, most obviously the massive system being
rammed together by AT&T Corp. AT&T's $116 billion
acquisition binge has given consumers their brightest
hopes yet -- after years of waiting -- that some company
might actually show up and offer them a speedy home
connection to the Internet. Not only is AT&T racing to
provide that service via cable modem, but the threat it
poses has the phone companies actually moving
seriously to offer consumers fast access via DSL.
All to the good -- except that a
number of municipalities, egged on
by GTE Corp. and AOL's openNet
Coalition, as well as by
anti-everything consumer groups --
have adopted or proposed
regulations requiring that AT&T
open its cable lines to competing
Internet-service providers.
AOL has a valid concern: that
AT&T will offer customers its
own Internet-access service as part of a package deal,
but charge extra to add competing services such as
AOL's. But this is putting the cart far before the horse.
Yes, there are potential problems for consumers with
AT&T's amassing such power over high-speed access,
and the FCC will have to watch this issue carefully in
the years to come. But there's a more fundamental
problem with high-speed access that's hurting consumers
right now: They can't get anybody to sell it to them.
For years now, the FCC has been frustrated by that and
looking for a way to hurry things along. The current
small-government era kept it from intervening and
adopting incentives and regulatory spurs for rolling out
high-speed access; now, sensibly enough, the agency is
refusing to intervene and eliminate the rewards of the
one company that's actually taking risks to deliver that
access. Despite what tomorrow may bring, today the
FCC is correct in not letting the perfect be the enemy of
the good -- and more importantly, in not letting the
perfect be the enemy of consumers.
Moreover, whoever said cable modems are the wave of
the future? The vast majority of speed-starved
consumers are agnostic on the question and will gladly
fork over $60 a month to the first person who arrives
with a high-speed link, no technological questions asked.
Remember DSL? AOL certainly does. When it isn't busy
coaching lobbyists and bawling at the government to
save it, it's making deals to ensure its online service is
offered with telecommunications companies' DSL lines.
It's struck such deals with the likes of GTE, Ameritech
Corp., SBC Communications Inc., and Bell Atlantic
Corp., and others are in the works. Instead of shrieking
at the FCC, AOL ought to be making sure the telephone
companies move at Internet speed.
Then there's the farcical instant-messenger fight pitting
AOL against Microsoft -- and against its own bedrock
philosophy, if one still exists. AOL's fear with
cable-access is that AT&T, given a dominant position in
the market, will block other Internet-service providers
from accessing its network. Well, AOL ought to know:
After all, that's exactly the tack it's taking to defend its
dominant position in instant messaging.
AOL's ICQ and Instant Messenger
(AIM) have become wildly
popular, with nearly 80 million
users. AIM in particular has
provided a way around poky,
clogged corporate e-mail systems
and become the gotta-have-it
social lifeline for the well-heeled
teen tribes of America.
It's also caught the eye of none
other than Microsoft, which
recently introduced MSN
Messenger, an instant-messaging
service that can communicate with
users of AIM as well. AOL
charged that Microsoft was
breaking into AOL's network and
then tweaked its servers to shut MSN users out. At
which point Microsoft found a way around the lockout,
AOL headed them off again, and so on. (Users of
instant-messaging systems from Yahoo! and Prodigy
have also found themselves unable to reach AIM users.)
All of this would be very amusing, if AOL weren't so far
up on the same high horse it once delighted in knocking
snotty tech companies off.
For the most part, AOL's strategy has been to stress
security concerns while making the right noises about
working with industry-standards organizations on setting
ground rules for instant messaging. Hence AOL
Interactive Services chief Barry Schuler's making the
rounds talking about how AOL would begin actively
participating in a working group of the Internet
Engineering Task Force on the problem -- a step
Microsoft, Yahoo and Prodigy have been urging AOL to
take.
That suggested the posturing -- and the games between
AOL and Microsoft programmers -- might soon cease.
Yet at the same time, AOL has shown an uglier face. It
has set up its own advisory group with executives from
the likes of Apple Computer Corp., Novell Inc., and
RealNetworks Inc., which suggests it is considering a
larger standards fight that would buy it even more time
to amass market share. (One presumes that if a coalition
emerges from this group, AOL won't call it openNET.)
Along those lines, Mr. Schuler told ZD Network News
that AOL is eager to work with companies on issues of
interoperability, and is merely maintaining controls to
ensure consumers using its service have a good
experience. If that reminds you of the disingenuous
consumers-first cant that Microsoft employees have been
spouting in the antitrust trial, it should. For indeed, Mr.
Schuler told ZD that if Microsoft wants access to AIM
users, it could license that access in much the same way
AOL struck deals to get an icon in Windows.
And there, finally, is what this is all about: AOL is all
grown up and has a hammerlock on a market of its own,
and it wants to stick it to Microsoft for the years of
slights and bullying and bad behavior it had to endure. Is
there a lovely justice in Microsoft having to grit its teeth
and endure sudden software tweaks, endless standards
debates and wide-eyed protestations of innocence when
it wants to enter a new market? Yes -- of course there is.
(Not to mention the amusement value of Microsoft being
pious about open standards.) But there are also those
caught in the middle: People who want to communicate
with friends and colleagues without worrying about
grudge matches between fabulously wealthy companies
short-circuiting the process. They're called consumers.
Remember them? |
