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============================================================================== Seidman's Online Insider ============================================================================= Weekly Summary of Major Online Services and Internet Events ----------------------------------------------------------------------------- Vol. 3 No. 9 March 2, 1996 ============================================================================= Copyright (C) 1996 Robert Seidman (robert@clark.net). All rights reserved. May be reproduced in any medium for non-commercial purposes, so long as attribution is given. IN THIS ISSUE ============= -Notes from the Editor -AT&T Announces FREE Access -CompuServe: More Woes in Germany? -NewsWorthy Notes -Stock Watch -Disclaimer -Subscription Info Notes from the Editor ===================== A year ago, when I joined IBM, I really wasn't sure if I'd still be producing this newsletter a year later. While I'm happy to take full credit or blame for this newsletter, the simple fact is that the flexibility my management has extended me in producing this newsletter has allowed me to continue doing it. Several months ago, I became convinced that I was not going to be able to perform my responsibilities at IBM, where I was in a management role and continue with publication of the newsletter. I probably realized it even before then, but the thing was, I really WANTED to do both. I gave it a good shot, but it wasn't working for me . So I approached my management with my dilemma and we came up with a solution that allows me to continue on with the infoSage project < http://www.infosage.ibm.com > and allows me to continue the newsletter. While I feel very fortunate to work for such a great management group, it is a bittersweet experience for me to step out of my management role. There are many people I owe a great deal of thanks to, and I'd like to thank them here. There are two people that I owe a great deal. Gideon Sasson, who recruited me to IBM and New York during a mild ("see it isn't THAT cold!") winter and then fled for the warmer climes of San Francisco to take an executive position at Charles Schwab working on their online efforts -- before the hellish winter of '96! Mike Moran, for teaching me a great deal and always making me laugh. Gideon and Mike have not only been great bosses and mentors, but they're about the best friends anyone could ever hope to have. Also, I'd like to thank Joe Damassa, for his continued flexibility and for serving as the ultimate role model for business casual dress! Someday, when I lose about 30 pounds, I'll find out where he shops. Most importantly, I'd like to thank "my" team. One of the best parts about starting at the beginning of a project is that you get to assemble your own team from scratch. Over the past year I've assembled a pretty motley crew, but it is only through their heroic efforts that I've been able to "tune out" long enough to do the newsletter and not wind up in a cardiac arrest unit somewhere. So thanks to Scott Kaufman, Gerald Christensen, Peter He, Laura Bailey, Marilyn Fowler, Cheryl Bennin, Steve Miskovitz, Julann Schatz, Celeste Lettera, Caryna Wong, and Evans Su for a very wonderful experience. AT&T Announces FREE Access ========================== AT&T announced this week that it's WorldNet service for consumers would launch later this month and that AT&T customers would receive 5 free hours of access each month for the first year, without any monthly charges. Additionally, a flat-fee plan for unlimited access of $19.95 for AT&T customers and $24.95 for non customers. Non AT&T customers can also go with a $4.95 a month for 3 hours, with additional hours costing $2.50. *So what's the big deal?* Well, if you throw out the 5 free hour thing, what is the big deal about the announcement? Truth is, without the 5 free hours, the offering is nothing particularly special, especially if you're not an AT&T customer. CompuServe, via its SpryNet service already announced a $19.95 flat-fee service and the truth is, if you're going to pick one, right now I'd advise SpryNet simply because they have so many more points of presence (AT&T is talking about 200 POPs and CompuServe has 480.) The thing is, you can't simply overlook the 5 free hour thing. This is five free hours in the truest sense: you get 5 hours of access and you don't have to pay a dime for it. No $9.95, $7.95, $4.95 or even $.95. Nada. That is a pretty big deal because it would sure seem that most of the people who already access need 5 hours or less. Free is attractive, because if you have a computer and a modem, there's no cost barrier. While some have speculated that AT&T is going for the hook in obtaining a lot of subscribers quickly and in hopes of getting the subscribers to either move up to the $19.95/$24.95 flat-fee service or go over the 5 hours and start paying hourly charges, I don't necessarily think that's what this is all about. I think like Microsoft, MCI and anyone else who envisions a world where a lot of transactions will be performed online, AT&T wants a piece of the transaction revenue. *What Does it Mean for the Rest of the Pack?* While I received several messages from people telling me that this finally means the commercial online services like AOL, CompuServe and Prodigy are dead, in the short run, I don't believe this will prove to be the case. In fact, if we use all the hoopla over the Microsoft Network months before it launched, as a benchmark, in the short run the AT&T announcement is probably good news for the online services. "Every time something happens that raises awareness about these services, we add a lot of subscribers," said CompuServe spokesman Russ Robinson. Indeed AT&T's announcement should raise awareness. And, in spite of the fact that there is a ton of content on the net, the commercial services do add value for many members. But over time, the perception of that value will continue to diminish and the services will have to compete on price. The general nature of the many, many messages I received from readers about AT&T was: "If it isn't about long distance, they'll screw it up. UNIX. NCR. I rest my case." While a part of me very strongly sides with that contingent, I'm a realist. AT&T has a good brand name. Most people do not think badly about AT&T. Overall, AT&T is a very "trusted" company. From a recognition standpoint, that will probably prove a big plus. For the 80 million or so AT&T customers, adding FREE might throw them over the top. "It is a serious mistake for us to be online/Internet centric here," said Peter Krasilovsky, an analyst with Bethesda, Md. Based Arlen Communications. "This is all about customer retention," said Krasilovsky. A $9.95 monthly gift to subscribers is more compelling than a one time $50 check." Krasilovsky said that AOL wasn't in a position to do a deal like AT&T's because their network costs (40% of AOL's expense, according to Krasilovsky) are too high. He felt CompuServe, with its network, was better positioned here and that in theory Prodigy could be well positioned via the Advantis network. *How Much Will it Cost AT&T?* I think Krasilovsky is right about the $9.95 gift (the going rate for 5 hours on the commercial service) being very compelling. But there's one thing I don't believe. I don't believe AT&T has fully considered in light of the possible lack of revenue just how much it is going to cost them to provide service for non revenue generating accounts. I realize, a year from now that AT&T can begin charging all the accounts $5/mo., but I'd be surprised to see that happen. One of the things AT&T is touting is that it can support these accounts better. Let's face it, support for Internet/Online services pretty much sucks accross the board, and I for one, don't expect AT&T to be any different. They're not starting out on the right foot either. They were overwhelmed with calls after the announcement on Tuesday. Initially, all you'd get was an automated voice response unit that would lead you through the steps to sign up. Small questions like, "Do you have local access in my area," could not be answered because there was no live person to speak with. AT&T later corrected this, but it didn't work out well according to the Cowles/SIMBA Media Daily. "But then repeated tries to speak to a representative Wednesday afternoon produced only a recording that said they were all busy "and will be for some time." Callers were told to hang up and try again later," the Media Daily reported. "The call volume has unquestionably created some problems for us," AT&T spokesman Chris Pfaff told the Media Daily. "We were just not prepared for it." Even after waiting, you still couldn't find out whether local access would be available in your area. The Media Daily said AT&T plans to announce that later. The service was announced to be available effective March 14. Exactly when were they planning on announcing? Actually, the Wall Street Journal reported on Friday that only DAYS after the announcement, AT&T is already saying it will be late with the launch because the system for tracking data still needs many computer nodes. Still the message about the phone lines being busy "and will be for some time" was pretty good comic relief. There is a big difference in the level of quality necessary to answer complex questions about domain name servers and winsock.dll files compared to what's necessary to place a collect call or handle a billing question. America Online has grown to thousands of employees, most of them being technical and customer service reps. Let's say that AT&T is able to generate 5 million users. Let's also say, for argument sake that 2/3rds of them never use more than the 5 hours. That's over 3 million non revenue generating accounts. But those 3 million subscribers who aren't generating any revenue will certainly generate a lot of phone calls. Bet on it. AT&T is saying that the FREE deal for AT&T customers is only for the first year. Could be. But don't be surprised if it doesn't turn out that way. *Remember Microsoft?* It's funny to see all the reports now that Microsoft may try to move to a five free hour deal similar to AT&T's. No one year trial, you won't have to be an MCI customer, just free. See Bill Gates believes that someday you'll do everything online and that there will be a ton of transactions. He wants his part of that transaction fee. Okay, that isn't particularly funny, but it's funny to me because all the scuttlebutt prior to the launch of MSN was that Microsoft would in fact give away 5 hours of access. That had been pretty widely rumored. It has been said that the only reason Microsoft backed away from that strategy was because of the anti-trust investigation. Now AT&T has set a precedent and Microsoft may get its wish after all. And you better believe that if that happens, it will get Steve Case's dander up and I'll have to start whining about how FREE access directly from the desktop is anti competitive (even if it's a hell of a deal!) Speaking of whining *Baby Bells Bawling* The New York Times' John Markoff wrote a story earlier in the week about how the Baby Bell's are protesting AT&T's announcement. They don't like the fact that AT&T won't have to pay them any money when the customer calls a local number and connects to the AT&T network. The Bell companies aren't happy about it because back in the early 80's when it was ruled that AT&T wouldn't have to pay for connections to its network via modem, there weren't that many people using modems. The truth is, AT&T doesn't have any special advantage over anyone else, including America Online, CompuServe, etc., who don't give anything over to Baby Bell when you access their networks. But see, because AT&T is AT&T it's different. Because a lot of people are using modems now, it's different. Because AT&T will give 5 free hours of access away, potentially 400 MILLION hours a month, it's different. But mostly, Baby Bell isn't happy about it because THEY PLAN TO GET INTO THIS BUSINESS TOO. Well, it's true that most of the phone networks were designed with the theory that consumers would only use the phone a very small percentage of the time. Modems and flat-fee access services are changing that. I have a second phone line for the modem. That phone line is pretty much in use all day. Should AOL, CompuServe, AT&T, Microsoft, or whatever service I am connecting to pay a fee because I am calling a local number to connect to their services? My theory on this is pretty simple: I'm paying an extra $20 bucks a month. ME! You give me free local phone service and then you can start talking to me about charging the computer I'm connecting to. Until then, get your grubby mitts out of our faces. I think Baby Bell chose now to scream louder because in light of the AT&T announcement, people might actually take notice. And I think people will take notice and that they'll come to the same conclusions I have. The simple fact is, the cost to Baby Bell for me to make a local call to my Internet provider, is no different than making a local call to a residence on the same street as my access provider. Oh sure, I may stay connected to my Internet provider longer, but I PAID FOR unlimited local calling. That shouldn't be AOL's or AT&T's problem. The notion that AOL and AT&T would be surcharged for access when a similar call to the Baby Bell's POP wouldn't be, well, that smacks of being anti competitive. I don't see it going in that direction. *FREE LONG DISTANCE!* AT&T and others continue to downplay the Internet style phone services, but by giving AT&T customers 5 free hours of Internet access for the next year, they are potentially giving away 5 free hours of long distance calling. Here's the deal: Become an AT*T subscriber and get all your friends to become AT&T subscribers. Sign up for WorldNet, get the 5 free hours and go buy one of the Internet telephone products. Voila! 5 free hours of long distance. And I mean FREE. Oh sure, the quality maybe isn't as good, but the price is definitely right. So, if you're reading the back of Popular Electronics magazine and you see an ad that says, "Reach Out and Touch Someone for Free: Send $1 for details!" save your money. *Conclusion* I think AT&T has its work cut out for them, but there's really not much risk involved with trying the service, so why not? Personally, I'm anxious to see how many subscribers they add. It will tell us a lot about what the demand for Internet access really is. And anything that gets more people online, well, I'm all for that. CompuServe: More Woes In Germany? ================================= First there was all the noise about CompuServe blocking about 200 newsgroups to appease German authorities (they've restored access to all but 5 of them), now I'm receiving a lot of notes about a rate change for German customers. Seems that CompuServe converted to billing in German currency and then added a surcharge to protect against economic fluctuations. The long and short of it is that with the addition of about 30 local access points, for some people the cost actually goes down and for some it goes up. The coverage in Germany wasn't extensive. According to David Gilroy, International Marketing Manager for CompuServe, with the recent deal with France Telecom, has expanded access from about 25% coverage in Germany to 50% coverage. Some members were dialing long distance to access and for those who now have local access, the costs should be less. Unfortunately, for those who already had local access, the service will be more expensive in a lot of instances. CompuServe still feels that their offering is very competitive compared to other offerings in Germany, but I'm getting reports that many people are switching to the German based AOL service or trying to register their accounts in the UK rather than Germany to get around the increase. Newsworthy Notes ================ ANTHEA WE HARDLY knew you. First Scott Kurnit left the ill-fated MCI/News Corporation venture and now Anthea Disney has left the venture to head up News Corp's HarperCollins publishing unit effective April 8. Disney will be replaced as editor-in-chief for I-Guide by Janice Kaplan, previously a deputy editor at TV Guide. I was impressed by Disney and hope she comes back to the online world someday. Still, given how screwed up that venture was, I couldn't help but imagine Ms. Disney doing her best George Jetson impression and screaming "Get me off of this crazy thing!" Her boy Elroy, er, Rupert, apparently did just that. President and CEO of HarperCollins is not exactly a bad way to land! -- MSN IN FLUX. InfoWorld Electric < http://www.infoworld.com/ > reported last week that several of the top Microsoft MSN employees, frustrated by the direction the service is taken are leaving to form their own company. The report said MSN chief technical officer, Naveen Jain, MSN chief architect Jeff Lill, and 10 other developers are leaving to found a company named OpenSpace. OpenSpace will sell Internet tools thatare designed to connect buyers and sellers. The article also reported that Microsoft believes that the departing officials may have broken their contracts by luring others to depart with them and taking intellectual property with them. -- THE SAN JOSE MERCURY News reported that executives at Apple are saying they'll pull the plug on their eWorld online service at the end of this month. Apple wouldn't confirm the report which also said that rather than moving eWorld to the Web, they'd do away with the service altogether and concentrate on Web based services. Reuters reports on Sunday that Apple will hold a conference with analysts tomorrow (Monday) to review their strategy. -- LAST WEEK I wrote that someone ought to be spending money trying to develop AOL style chat services for the Internet. Turns out, there are people doing just that. While there are many IRC clients which make it easier to use, Quarterdeck has done a great job with their Global Chat client. They have linking built in and as I would've done if I'd developed it, they found a way to build in advertising. Check it out at < http://www.quarterdeck.com/chat/ > -- I WONDERED ALL WEEK why Netscape continued to slide down with the rest of the Internet/Online stocks after the AT&T announcement. Since AT&T has licensed Netscape for the WorldNet service, the continued Netscape slide surprised me. Until Friday. That's when I saw an AP report stating that Netscape co-founder Marc Andreesen had filed to sell stock worth $14 million. The story also said that Peter Currie, Netscape CFO and Michael Homer, a Netscape VP had filed to sell 37,500 and 45,000 shares respectively. -- Personally, I don't blame Marc. I mean, optimistically speaking, it will be years before Netscape could really be worth the amount it was at during its heyday (and though it's down about $33 from its all-time high, it still has a stock value of about $4.6 billion). Marc is young. $14 million is a lot of money. I can picture Marc on a tropical island somewhere. He's the guy sipping rum and laughing maniacally at the fact that anyone really cares about the Web that much. And laugh he should, because his college project has allowed him the opportunity to earn what it will take me, at the current rate, between 150 to 200 years. How's that for putting it all in perspective? Congratulations, Marc! -- E-COMMERCE IS HOT! Okay, so what if the only real money being made on the Internet is being made Marc Andreesen style, E-Commerce is a hot topic. c|net is hosting a conference on electronic commerce in Newport Beach, Ca., March 20-22. Keynote speakers include Netscape president, Jim Barksdale. For more info call (415) 395-7805 x165 or by email at conference@cnet.com or on the Web at < http://www.cnet.com/Community/Econference/ >. -- YAHOO! INTERNET LIFE ed-in-chief Barry Golson is staffing up for the website and print magazine to go monthly later this year. Interviewing selected senior NY editorial and art folk with experience in both media. Prefers faxes at 212 503 4799. -- OKAY, so the previous two items looked suspiciously like advertisements. They aren't, because advertising assumes that some money exchanges hands and that didn't happen. But, you have to start somewhere, and I like the thought of being on a tropical island somewhere, sipping rum and laughing maniacally. So let me dream about "someday". See you next week Stock Watch =========== % 52 52 Week's Change Week Week Company Name Ticker Close 1 Week High Low ------------ ------ ------ ------ ------- ------- @Net Index IIX $224.52 -9.6% $259.85 $185.76 America Online AMER $45.75 -18.1% $57.00 $16.75 Apple AAPL $26.88 -10.0% $50.94 $26.84 AT&T T $62.63 -5.6% $68.88 $47.88 BBN Corporation BBN $34.00 3.0% $48.75 $16.13 CMG Information Svcs. CMGI $37.00 -18.9% $50.25 $5.50 CyberCash Inc. CYCH $46.50 -18.1% $64.50 $24.50 FTP Software FTPS $13.69 2.3% $40.63 $10.38 H&R Block HRB $34.38 -14.9% $48.88 $31.50 IBM IBM $118.13 -6.0% $128.88 $77.00 MCI MCIC $29.38 0.4% $31.00 $19.09 Mecklermedia Corp. MECK $10.75 -8.5% $24.38 $3.44 Microsoft MSFT $95.50 -7.7% $109.25 $62.88 Netcom NETC $24.50 -16.2% $91.50 $19.00 NetManage NETM $12.00 2.1% $34.00 $10.00 Netscape Comm. Corp NSCP $53.63 -12.1% $87.00 $22.88 News Corp. NWS $22.63 1.1% $25.13 $17.63 Oracle Corp. ORCL $49.13 -8.4% $55.00 $28.00 PSINet Inc. PSIX $9.88 -22.5% $29.00 $8.75 Sears S $48.25 0.8% $48.25 $24.22 Spyglass Inc. SPYG $23.00 -23.3% $61.00 $13.25 Sun Microsystems SUNW $49.00 -9.3% $57.13 $15.13 UUNET Technologies UUNT $29.75 -20.1% $98.75 $21.75 Disclaimer ========== I began writing this newsletter in September 1994, at the time I was working for a technology company that is now owned by MCI. In March 1995, I began working for International Business Machines Corporation. Subscription Information ======================== To subscribe to this newsletter by e-mail: Send an e-mail message to: LISTSERV@PEACH.EASE.LSOFT.COM In the BODY of the message type: SUBSCRIBE ONLINE-L FIRSTNAME LASTNAME Example: Subscribe Online-L Robert Seidman If you wish to remove yourself from this mailing list, send a message to: LISTSERV@PEACH.EASE.LSOFT.COM and in the body of the message type: SIGNOFF ONLINE-L . A Web version of the newsletter is available at: <http://www.clark.net/pub/robert>.