AOL and Free Net Access

Joe Nocera and Kara Swisher

AOL and Free Net Access

Joe Nocera and Kara Swisher

AOL and Free Net Access
An email conversation about the news of the day.
Aug. 25 1999 12:31 PM

Joe Nocera and Kara Swisher


Dear Kara,


A new day, and I'm back in Northampton after a quick trip to New York yesterday. Between the Amtrak ride to and from the city--Amtrak out West might be nice, but on the East Coast it's hell--and the awful fluorescent lights in the Time Inc. building, where Fortune is headquartered, I was a pretty cranky guy yesterday. My mood is much improved today, back in my lovely little office overlooking this lovely little downtown, reading about the Red Sox victory last night--rooting for the Red Sox is the curse of all native New Englanders--perusing the New York Times before I saddle up for a day in front of my computer. I check my e-mail, and there is your latest missive--sent, it says, at 5:30 a.m.! I'm happy to get it--though momentarily worried that you're not getting enough sleep on what is supposed to be, after all, a short vacation for you. In any case, yesterday I didn't think I could muster another thought about the Internet if you put a gun to my head. But as I say, today I've got a whole new outlook.

The distinction I was trying to make yesterday was between the Internet as a tool to make the world a better place (which I don't buy) and the Internet as a powerful business tool (which I very much do buy). And so there is not that much in your message that I disagree with, because you are focusing on the business dynamics. Where we do differ, clearly, is our level of enthusiasm for the coming of interactivity. You're right: I roll my eyes at the thought of an "Internet refrigerator." I'm not all that sure I'd even want to have a Web site dedicated to me and my needs--which are pretty mundane and pretty well satisfied without such a site. For that matter, I'm not even much of a cell phone user--I've got a digital phone, but it only works about half the time, and I don't bother to get anything else.

(To answer another query of yours: On the privacy issue, I subscribe to the Scott McNealy position. When asked about this one time, he said something to the effect of: "You've already lost your privacy. Get over it." Some years ago, I wrote a book that was devoted, in part, to the rise of the credit card industry. In doing that research, I became painfully aware of how much personal information was already "sloshing around," as you put it. In other words, long before the Internet, this battle had been lost. And in truth, I don't much care what is discovered about my "habits" through my Web use.)

I was particularly glad you brought up AOL, for the story in the Times that caught my eye today was headlined "America Online Offers Free Internet Use in Britain." This is big, and potentially very dangerous for AOL. The reason it is the most successful Internet company is that it has a huge revenue stream because it charges a monthly subscription fee. There is no way it wants give away free what it used to charge for, but it is being forced to do so by a British company that is offering free Web access--and has taken away a big chunk of AOL's market share in Britain. This, of course, is precisely what Microsoft did to Netscape--it gave away for free a product (the browser) that produced most of Netscape's revenues. Marc Andreessen, the former Netscape wonderboy who now works at AOL, must be having nightmares!

There it is again, though--the Net's ability to blindside an established company, to squeeze away profits, and to give consumers a deal that seemingly makes no economic sense but is great for them. The irony is that the established company in this case is not some so-called bricks-and-mortar dinosaur, but a Net company! My friend and colleague Andy Serwer predicts that within 12 to 24 months, nobody will charge for Internet access. Where in the world will that put AOL then?

I will say this for AOL. Unlike the folks at Netscape, who never figured out what to do when Microsoft took away their bread and butter, those guys at AOL are awfully resilient. They proved it a few years ago, when it was widely believed that their service would be rendered irrelevant by the growth of the Internet. And the company's performance during the past few years has been little short of astounding. I have no doubt they will adapt to broadband, and deflect the threat posed by AT&T. And they've done a great job keeping Microsoft from eating their lunch, which is no easy task. But can they adapt to the potential loss of most of their revenue stream? I dunno. Do you?

I leave you with one other question, which I've been wondering about for awhile. When I was covering the Microsoft trial, I got to see two AOL executives testify: David Colburn, who was on the stand twice, and CEO Steve Case, who was deposed one day when the trial was in recess. They were both smart, clever guys who could not be rattled, and easily deflected even the most hostile questions from Microsoft's lawyers. (Colburn struck me as one mean SOB.) But the trait they had most in common is that were both real wiseacres, sarcastic and darkly funny. Is that kind of sarcasm part of the AOL culture? And if so, what does it say about the company?


Joe Nocera is an editor-at-large for Fortune magazine who lives in Northampton, Mass. Kara Swisher covers Silicon Valley for the Wall Street Journal and is the author of How Steve Case Beat Bill Gates, Nailed the Netheads, and Made Millions in the War for the Web (clickhereto buy the book).