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From: "Jim Whitehead" <ejw@cse.ucsc.edu>
To: "FoRK" <FoRK@xent.com>
Subject: AOL scaling back IM interoperability
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Date: Tue, 23 Jul 2002 13:27:06 -0700

I suppose the main surprise here is that AOL is coming clean at all. After
all, its long-running game of talking interop, and doing everything possible
to prevent open standards in this arena, seemed to have been working fine,
with most end users completely oblivious to AOL's actions.

http://www.quicken.com/investments/news/story/djbn/?story=/news/stories/dj/2
0020723/ON20020723000833.htm

America Online Scales Back Instant-Messaging Compatibility Efforts
Updated: Tuesday, July 23, 2002 01:23 PM ET

Dow Jones Newswires

NEW YORK -- America Online appears to be scaling back efforts to make its
instant-messaging service compatible with rival services.

The unit of AOL Time Warner Inc. (AOL, news, msgs) said in a regulatory
filing it is now focusing on messaging interoperability methods that are
more limited in scope than the kind envisioned by the Federal Communications
Commission when it approved the AOL-Time Warner merger in January 2001.

America Online isn't required to make its messaging system interoperable
with others, but the FCC's merger approval included what it considered to be
incentives for the company to do so. It also required AOL to file progress
reports on its interoperability efforts every six months. The most recent
report, filed last week, disclosed the company's new direction.

The upshot of the strategy shift is that the instant-messaging market isn't
much closer to broad-based interoperability than it was 18 months ago,
according to industry analysts. Unlike e-mail, users of most competing
instant-messaging services still can't directly trade messages. So an
America Online instant- messaging user can't communicate with a user of
Microsoft Corp.'s (MSFT, news, msgs) MSN Messenger, except by using
third-party software such as Trillian.

America Online, the biggest instant-messaging provider, has been criticized
for blocking users of rival services from gaining access to its users. The
company also has been accused of dragging its feet amid industry attempts at
interoperability.

For its part, America Online has said it wants to protect the security of
its users and the reliability of its system. And it points out that other
companies have so far failed to agree on interoperability standards.

When the FCC approved the AOL-Time Warner merger, it said that if America
Online wanted to offer video-conferencing and other advanced
instant-messaging features over Time Warner's cable lines, it first had to
enable its instant- messaging users to communicate with users of rival
services. The intent of the condition was to prevent America Online from
widening its dominance of the instant-messaging market by exploiting its
access to Time Warner cable systems.

AOL hasn't yet introduced video features, even though rivals Microsoft and
Yahoo Inc. (YHOO, news, msgs) did so last year.

Specifically, the FCC said America Online would have to implement a
technology known as "server-to-server interoperability" before it could
offer video. The technology would allow users of non-America Online services
to detect when AOL users are online, and to trade messages. It would do so
via communications between the computer servers operated by each messaging
provider, using a common language.

But in the progress report filed with the FCC last week, America Online said
it will "focus its efforts" on alternatives to server-to-server
interoperability. They are more limited in scope than server-to-sever.

As an example of an alternative, America Online cited a recent agreement to
make its instant-messaging service compatible with a new messaging service
from Apple Computer Corp. (AAPL, news, msgs). The Apple service, IChat, will
be included in Mac OS X 10.2, the new Apple operating system set for release
in August.

IChat users will be able to talk to America Online users, but it won't
involve server-to-server interoperability. Instead, the actual exchange of
messages will occur only on America Online's servers, even as IChat
customers use Apple software.

"We believe this kind of hosted IM solution provides, at least in the short
term, a secure, reliable and cost-effective means to provide
interoperability between AOL, IM and unaffiliated IM communities," Steven
Teplitz, AOL's associate general counsel, wrote in the progress report to
the FCC.

As to the apparent change in strategy, company spokeswoman Kathy McKiernan
said Tuesday: "It's a recognition that server-to-server has proven a hard
nut to crack for the entire industry." Indeed, users of America Online's
rival services can't directly communicate with each other, either.

The alternative solution "was something that we could implement now to
provide for IM communities to communicate," said Ms. McKiernan, adding
America Online would explore partnerships with other messaging providers,
similar to the Apple deal. None has been announced so far.

FCC officials couldn't be reached Tuesday.

America Online hasn't ruled out the possibility that it would someday
implement server-to-server interoperability. The company has explored the
technology in the past, including a server-to-server last year with Lotus
Development, a unit of International Business Machines Corp. (IBM, news,
msgs).

But America Online's interoperability test with Lotus was "limited in scope
and functionality." True server-to-server technology "would require further
significant expenditures of time and resources to develop," wrote Mr.
Teplitz.

The Internet Engineering Task Force, a group devoted to developing Internet
standards, has been working on a server-to-server messaging technology but
hasn't yet developed a final version, according to America Online. Task
force representatives couldn't be reached.

The company's strategy shift means that true interoperability in instant
messaging is still a couple of years away, according to Michael Gartenberg,
analyst with Jupiter Research.

"It's still something the market wants," he said. "At some point, it'll
happen, but maybe a couple of years down the road."

Mr. Gartenberg and other analysts believe America Online hasn't actively
pursued true interoperability because it wants to protect its large user
base. If messaging systems were compatible, the company could lose ground
because prospective customers might see no difference in choosing another
provider, as long as they can reach America Online users.

But partly because of its lack of compatibility and the FCC conditions,
America Online hasn't kept up with rivals in offering new services. MSN and
Yahoo have had video-conferencing via instant-messaging since last year. AOL
has denied that it has held back on video messaging to avoid making its
system interoperable, arguing there is little consumer demand for it.

But the new features have paid off for the company's rivals, and they are
catching up. Between last October and April, Microsoft's Messenger user base
rose 32% to 29.1 million, according to ComScore Media Metrix, while Yahoo's
base jumped 19% to 19.2 million users. In the same period, the number of
users of AOL-branded messaging services increased 7% to 54.9 million.


-Peter Loftus; Dow Jones Newswires; 201-938-5267; peter.loftus@dowjones.com

Copyright 2002 Dow Jones & Company, Inc.
All Rights Reserved


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