Federal Regulators Not on AOL’s BuddyList

January 12, 2001 • Commentary

The Federal Communications Commission has finally allowed America Online and Time Warner to merge, but not before extracting a senseless concession. The FCC was concerned about the free AOL Instant Messenger (AIM) chat tool, which allows real‐​time, faster‐​than‐​e‐​mail communication. While now used mainly by flirting teens, the tool is seen as the future of Internet communications. Critics claim that AIM is a monopoly, which merits regulating it out of AOL’s hands.

America Online’s dominance in messaging (64 million users) bothered FCC staffers and, in particular, rivals like Microsoft and Yahoo. So AOL will be required to make future enhanced versions of AIM “interoperable” with competing instant messenger tools. AOL critics believe chat tools should allow real time talk regardless of provider, the way e‐​mail or the telephone does.

But the real display of monopolistic behavior with respect to AIM is the collusion between rivals and regulators at the FCC, a.k.a. “Fully Competitor Compliant.” More acceptance of access regulations, especially on the Bush administration’s watch, threatens to turn the Internet into a lazy public utility. It also might kill the need to devise competing business models and rival networks that offer better features.

The newest AIM download — free to consumers — allows “buddy list” access from any computer, online game support, file sharing and voice chat (bypassing the phone company). But probably nothing frightens rivals as much as AIM Mobile, which promises instant messaging to millions of AIM users via web‐​enabled wireless phones. America Online is extending a “monopoly” from one platform to another, as Microsoft supposedly did by bundling Internet Explorer with Windows.

In response, AOL competitors such as Yahoo, Microsoft, AT&T and Excite@Home formed a coalition called IMUnified. Their intent is to develop interoperability standards by which all their members will abide. The coalition apparently thinks that interoperability capabilities already exist. Yet IMUnified members still are not interoperable with one another, and wouldn’t be but for the rogue efforts of a few brazen software offerings like OMNI, which boast access to AIM and other messengers.

If the coalition would demonstrate to the world that interoperability works among its members and is superior, AOL’s refusal to participate will hurt it as users embrace the new standard. Downloading remains free, after all.

The IMUnified coalition’s failure to follow its own script shows it isn’t interested in an interoperability standard. It’s interested in having AOL’s customer base handed to it on a silver regulatory platter. So the IMUnified effort is best understood as an attempt to mislead the public and to humiliate America Online.

Like any business, America Online is uninterested in sharing its customers with competitors, except in legitimate business deals. Undoubtedly AOL would prefer that users of rival products switch to AIM. That brings up the key fraud in the IMUnified position, as well as the truth that AOL dares not utter. Ignored in all the posturing about standards is the fact that AOL already has established a standard, and needs no further validation other than that already granted it by the choices of AIM downloaders. Only that, not the desires of competitors, is relevant. All producers under capitalism must understand that they’re on their own: AOL is not obliged to help other messenger services succeed.

The FCC needs to realize that shoehorning competitors into AOL’s system is counterproductive for competition. Competing network business models are a virtue because consumer benefits depend upon battles that distinguish networks from one another.

For example, some companies who think “business chat” represents the future have aggressive plans to use instant messaging for real‐​time customer service, workforce management and document/​file sharing, while others think peer‐​to‐​peer messaging that bypasses central servers will dominate. And some note that chat clients of today are loaded with security problems and still need work. Such competing visions about what instant messaging should entail are crucial for generating advances. Plus they will help assure that interoperability emerges, but only when it makes sense and only in a market‐​driven manner.

The idea that rivals should be handed access to a network they didn’t help create, merely on the basis of declaring themselves to be in the instant messenger business, represents appalling corporate regulatory pork and an overreach of government power.

And, if the situation were reversed, regulators would argue that everybody sharing a common network smacks of collusion and consumer exploitation. Go figure.