July 26, 1999 3:35 PM PDT

Instant message fight shows power shift

In the ongoing fight between America Online, Microsoft, and other players over open standards for instant messaging, it has become increasingly hard to tell who is dominant and who is the underdog.

America Online has entrenched itself in a battle to prevent users of competitors' messaging products from communicating with AOL Instant Messenger (AIM) users. AOL has said it is protecting its users from privacy violations, but critics say it is only protecting its market dominance.

One of those critics, in a curious role-reversal, is Microsoft, which accuses AOL of pretending to stand up for its customers, when it's really only blocking competitors from a market it controls.

For many observers, Microsoft's protests sound odd, given that the company is often criticized for protecting its own market dominance by refusing to open standards. "It's funny hearing Microsoft cry foul over monopolistic practices of a competitor kicking its butt online," said Jupiter Communications analyst Seamus McAteer.

AOL has 40 million registered users on its Buddy List network, which includes AIM and screen names in its proprietary service. Last year it acquired instant messenger ICQ, which has 35 million registered users as of March 1999.

Microsoft's MSN Messenger client, unveiled last week, included a feature that would allow users to communicate with AOL Instant Messenger (AIM) users. Microsoft wants to allow its new MSN Messenger users to access their AIM Buddy Lists.

AOL responded by blocking MSN Messenger--as well as instant messaging clients by Yahoo and Prodigy--from accessing its network. AOL stated it would block all attempts by rival services to access its user base, because the services require users to enter their AOL passwords, which the company deems a privacy violation.

"They are maintaining their hold on what they think is right for their own group of people," a Microsoft spokesman said in a previous interview. AOL is "more focused on maintaining their own situation than what's right for their consumers."

As the rhetoric heats up between the two sides, analysts and observers have noted the power shift that appears to be taking place. AOL in the past has promoted openness in specific areas such as the market for high-speed Net access via cable, citing the need for competition. Meanwhile, Microsoft has embraced openness in this arena despite widespread accusations of monopolistic behavior, including an ongoing antitrust suit being waged by the Justice Department.

Microsoft supports the Internet Engineering Task Force's (IETF) Instant Messaging and Presence Protocol. The group is looking to develop a standard to make competing instant messaging technologies compatible.

For AOL's part, the company says it is in favor of standards, under the right circumstances: "Instant messaging on the Internet will be open and interconnected, and that's what we should be and that is a goal we certainly support," said AOL spokeswoman Tricia Primrose. "Our view is that without the right coordination, the security and privacy of Internet consumers will be at risk. We have contacted Microsoft to figure out a solution [that is] best for our members and Internet consumers in general."

Some observers say AOL's moves in this area will get it into more trouble down the line with consumer perception and its own efforts to shape the Internet. Instead of rejecting a standard, Rob Enderle, an analyst at Giga Information Group, said AOL should support the standard and become a pacesetter for everyone to follow.

"AOL should embrace the standard effort and take the lead in it," Enderle said. "The aspect of changing a product to block Yahoo and Microsoft is creating an image of a despot, which most likely drives people nuts."

Who's the bully, anyway?
Microsoft itself has long been accused of employing the same tactics for which it now is criticizing AOL. In the early days of the Web, for example, Microsoft tried to keep Netscape Communications away from the browser market, according to a deposition by former Netscape executive Marc Andreessen in the Justice Department's antitrust suit against Microsoft. In exchange, Microsoft offered up access to the closely guarded Windows application programming interfaces (APIs).

Ironically, Netscape is now a division of AOL, and AOL is the one being accused of unfairness by Microsoft.

But Netscape was only one of many software companies that have pointed a finger at Microsoft, saying the company's tight hold on its APIs is tantamount to unfair business practices because of the dominance of the Windows operating system. Oracle, RealNetworks, Sun Microsystems, and others all have argued that Microsoft has an unfair advantage because it has the final say over which APIs make it into Windows.

Last month, for example, Sun Microsystems chief executive Scott McNealy said Microsoft should be forced to open up its application programming interfaces so that software makers are better equipped to use their products with Windows.

But what many in the industry perceive as AOL's defensive stance against open standards has already drawn criticism.

AOL strongly supports the "Open Cable" initiative that calls for cable companies to allow third-party ISPs to sell broadband cable access over their lines. AT&T, which owns cable company Tele-Communications Incorporated and is in the process of acquiring MediaOne, wants to keep cable lines closed. The telecommunications giant also owns cable Internet access provider Excite@Home, which it plans to use as the high-speed ISP for its spate of cable access services.

Today AT&T general counsel Jim Cicconi responded to AOL's moves, calling the company's efforts to keep its instant messaging service closed hypocritical and a reflection of its own "disingenuousness."

"It's ironic that AOL--for the last several months holding itself out as the protector of 'openness' on the Internet--has now made evident the closed nature of its own system by sabotaging instant messaging communications between its customers and those of other ISPs," Ciccone said. "AOL's ongoing effort to leverage its market power to block communication among Internet users who refuse to use AOL's proprietary system is hypocritical and antithetical to the very ethos of the Internet."

But AOL's Primrose maintained that the company's moves were made to protect users' privacy: "When I see a product that risks privacy of consumers, I ask the question, 'Who is serving the consumer best?'"

The Netscape factor
AOL critics also point to its Netscape subsidiary, which is one of the most vocal proponents of open standards on the Web, as a source of conflicting agendas. Netscape established Mozilla.org in January 1998 to shepherd open-source development of its Communicator browser. Netscape began publishing its source code in response to Microsoft's Internet Explorer browser chipping away at its once-dominant market share.

Netscape is also spearheading the Open Directory initiative, which stems from its acquisition of Newhoo earlier this year. The project is charged with creating a directory of Web sites generated from the grassroots level. Lycos recently signed on to use the service.

A leader is still a leader
Still, for Jupiter's McAteer, the demand among competitors for standards simply illustrates further the momentum AOL has behind it in the instant messaging space.

Jupiter's McAteer compared AOL's instant messenger dominance to Microsoft's own dominance in operating systems. Both are killer applications that have accelerated the maturation of their markets in the Internet and desktop PCs, respectively. And both applications are making their markets more used in everyday life.

"There is something to be said for proprietary technologies, especially if you want to drive a platform quickly," McAteer said. "Microsoft has lost this battle?they've all lost this battle."

 

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