– Is AOL getting the right to offer Video and other advanced features, or – Is AOL no longer obligated to work toward allowing competitors to use their network? – Or both?

Frankly I have no problem with AOL innovating on top of their service.. I think it’s good for the industry and this limitation has caused them to lose market (such as it is) to other folks like EyeBallChat. But AOL, MSN, Yahoo et al should be mandated to interoperate as it benefits all parties to have a massive, interoperable network of networks.

The FCC shouldn’t have singled out AOL, but unfortunately AOL were the only guys who were merging at the time and this gave the FCC a lever.

-Ian.

—— http://story.news.yahoo.com/news?tmpl=story&cidX2&ncidX2&e=1&u=/nm/ 20030819/wr_nm/tech_aol_dc

Source: FCC to Lift AOL Instant Messaging Condition 2 hours, 7 minutes ago

NEW YORK (Reuters) – U.S. regulators are expected to allow AOL Time Warner Inc. (NYSE: AOL -news ) to offer advanced instant messaging ( news -web sites ) services without opening its systems to rivals, a source familiar with the matter said on Tuesday.

The Federal Communications Commission ( news -web sites )’s expected decision would lift a condition imposed on the 2001 merger of America Online and Time Warner.

AOL Time Warner, operator of the world’s biggest online service, in April asked the FCC ( news -web sites ) to lift the condition that precludes it from offering advanced services such as live streaming video.

FCC officials were not immediately available for comment.

Another source familiar with the decision said the FCC vote is 3-2 in favor of lifting the condition.

AOL Time Warner has said the instant messaging market had become more competitive.

“We think we made a compelling case,” said company spokeswoman Tricia Primrose. “We hope the FCC decision will be out soon and that we get a favorable result.”

Instant messaging is a popular Internet function that allows individuals or groups to have real-time text discussions, but providers have been developing more advanced services to lure more customers.

Possible offerings include live video and audio while chatting in real time.

AOL has already planned to offer the ability to send recorded video clips and have voice conversations through instant messaging in the next version of its online service, AOL 9.0.

The software will not feature live streaming video at its September launch.

When the FCC approved America Online’s purchase of media conglomerate Time Warner in 2001, the agency barred the new company from offering advanced instant messaging services like live streaming video until they work with other services or AOL Time Warner proves the ban is no longer necessary.

-Ian.

—– http://story.news.yahoo.com/news?tmpl=story&cid04&ncids8&e=6&u=/ washpost/20030724/tc_washpost/a32817_2003jul23 AOL Subscribers Down by 846,000 Thu Jul 24,12:23 AM ET

Add Technology – washingtonpost.com to My Yahoo!

By David A. Vise, Washington Post Staff Writer

America Online’s subscriber base plunged by 846,000 in the second quarter, as hundreds of thousands left for cheaper or faster Internet connections and a similar number were dropped because they had been mistakenly counted in the past, AOL Time Warner Inc. disclosed yesterday.

In addition, new disclosures about a federal investigation into improper accounting at Northern Virginia-based America Online Inc. showed that the division’s legal problems are hurting other parts of the AOL Time Warner media empire.

AOL Time Warner said yesterday that the Securities and Exchange Commission ( news -web sites ) would not allow it to spin off a portion of its cable television unit until it resolves a dispute over how to account for hundreds of millions of dollars in questionable revenue from a complex deal with German media firm Bertelsmann AG ( news -web sites ).

AOL Time Warner also said it may restate previously reported profits and sales linked to the Bertelsmann transaction. And the company indicated that it could not determine how long the SEC and Justice Department ( news -web sites ) investigations into its bookkeeping practices will last.

The company said its profit increased to $1.1 billion (23 cents per share) in the second quarter, from $396 million (9 cents) in the second quarter of 2002. Revenue increased about 6 percent, to $10.8 billion. The profit figure included a number of substantial one-time gains from the settlement of a lawsuit with Microsoft Corp. and the sale of various businesses.

Despite solid results in divisions other than America Online, AOL Time Warner shares fell yesterday by $1.14, or 6.8 percent, to $15.71, as analysts and major investors reacted to the continuing uncertainty caused by the SEC investigation, the threat of increasingly costly shareholder lawsuits, the deterioration in America Online’s performance, and disappointment that the strength of AOL Time Warner’s film, publishing and cable television operations did not prompt the company to substantially increase its financial projections.

“Our goal for the remainder of this year is to keep laying the foundation that will enable us to exit 2003 with more momentum than we had when we entered it, with an eye toward achieving, strong sustainable growth next year and beyond,” said Richard D. Parsons, chairman and chief executive of AOL Time Warner.

AOL, the nation’s biggest Internet service provider, has shed a total of 1.2 million subscribers over the past year and now has 25.3 million subscribers in the United States.

The company said the total includes 2.2 million high-speed subscribers, an increase of 300,000 over the past three months. During that period, AOL launched an enhanced high-speed offering and promoted it with an advertising campaign titled, “AOL for Broadband: Welcome to the World Wide Wow.”

In addition to losing dial-up subscribers faster than expected, AOL is predicting that its online advertising revenue will drop about 40 percent in 2003. The decline is occurring even though the total dollars spent on advertising online is growing nationally, a trend that can be seen in the financial results of some of America Online’s competitors, including search engines Yahoo and Google and many specialized Web sites.

AOL Time Warner had sought to persuade SEC investigators that they were mistakenly challenging the accounting for the two-part Bertelsmann deal. But the company said yesterday that the commission has refused to back down.

“The company and its auditors continue to believe the accounting for those transactions is appropriate, but it is possible that the company may learn additional information as a result of its own review, discussions with the SEC and/or the SEC’s ongoing investigation that would lead [AOL Time Warner] to reconsider its views,” the firm disclosed.

The Bertelsmann deal involved AOL’s sale of roughly $400 million in advertising to Bertelsmann in connection with the purchase of Bertelsmann’s stake in AOL Europe.

AOL Time Warner released its second-quarter results prior to the opening of stock trading yesterday morning. Although it cut its projections for America Online, the company beat Wall Street estimates as its cable television, motion picture and publishing businesses thrived.

“Our solid results in this quarter and the first half of the year give us confidence that we can deliver on all of our 2003 financial objectives,” Parsons said. He added that the company is continuing to reduce its hefty debt through the sale of businesses and the spending of billions of dollars of excess cash generated by operations.

The Warner Brothers and New Line Cinema movie units generated $572 million and $239 million, respectively, at the box office in the United States. “The Matrix Reloaded” led the way among new releases, while “Harry Potter ( news -web sites ) and the Chamber of Secrets” boosted DVD and CD sales.

“On balance,” said Deutsche Bank, “we think this report is good news.”

In a conference call with analysts, Parsons said he was no longer counting on the sale of stock in Time Warner Cable to generate cash for debt reduction this year. Instead, he said, the handling of any cable spinoff will be determined by broader issues, including the best way to help that subsidiary grow.

“The specific timetable for executing an IPO will depend on strategic considerations, not balance sheet imperatives, as well as the status of our SEC investigations,” Parsons said.

-Ian.

———-

Music Industry Ad Snipes at Downloaders 24 minutes ago Add Technology – Reuters Internet Report to My Yahoo!

By Michele Gershberg

NEW YORK (Reuters) – Music industry groups turned up the volume in their fight against song-swapping over the Internet on Thursday, warning Americans in a full-page newspaper advertisement that they could face legal action.

The advertisement is part of an aggressive initiative announced Wednesday by the Recording Industry Association of America (news – web sites), which said it plans to sue hundreds of individuals who illegally distribute copyrighted songs over the Internet.

The legal plans marked a sharp escalation in the battle against Internet piracy that until now had concentrated on shutting down the “peer-to-peer” services used for swapping.

Some experts said the group’s latest tactic will only alienate the general public.

“Next time you or your kids ‘share’ music on the Internet, you may also want to download a list of attorneys,” a bold print headline said in the advertisement in the New York Times, signed by 13 different music trade groups and associations.

The RIAA was a signatory to the Times ad, which argued that music can be bought online legally without harm to musicians.

“Stealing music over the Internet is no different than shoplifting CDs out of a record store,” the ad said. “It’s also a very public activity — meaning that offenders can easily be identified.”

More than 2.6 billion songs, movies and other files are copied over computer networks every month, according to industry estimates. Executives believe such trading has led to a 14 percent slide in revenues since pioneering service Napster (news – web sites) opened in 1999.

The RIAA, whose roster includes the five top record labels, has shut down Napster and several similar networks but failed to stem the tide of Internet sharing. It hopes the lawsuits and advertising might deter people in their own homes.

“We hope that parents will pay attention to what their kids are doing … that corporations will pay attention to what their employees are doing,” RIAA President Cary Sherman told Reuters.

Adam Cohen, a partner in the litigation department of Weil, Gotshal & Manges LLP, said the music industry in its battle shows “a lack of concern with alienating the consumer … It’s hard to imagine that this would really spur people to buy more records.”

Cohen, who has represented online radio and Webcasting services on copyright issues, noted the Napster case ended with a bankruptcy but left open the legal debate on targeting individuals who copy music for non-commercial purposes.

RIAA members include AOL Time Warner Inc.’s (NYSE:AOL – news) Warner Music; Vivendi Universal’s (NYSE:V – news) Universal Music Group; Sony Corp (news – web sites).’s (6758.T) Sony Music; Bertelsmann AG (news – web sites)’s (BERT.UL) BMG and EMI Group Plc (news – web sites) (EMI.L).

Bertelsmann is also the subject of lawsuits from EMI, Universal Music and music publishers for allegedly perpetuating online piracy with a previous investment in Napster.

The problem is Time Warner Cable. It’s doubtful that any U.S. RBOC wants to talk to AOL because of the fear of creating an 800-lb. gorilla that also has Cable assets. ILECs hate their cable counterparts. Moreover, they fear them.

So, one might think that the logic is to spin off or sell off Time Warner Cable. But wait — isn’t that a profitable business? Can’t do that right now… the mother ship needs to maintain as much margin as it can for reporting.

Hmm… maybe they should spin off AOL. Now, since it was AOL that actually bought all the other assets in the first place, wouldn’t that be ironic?

🙂

-Ian.

—- http://story.news.yahoo.com/news?tmpl=story&ncidX2&e=3&cidX2&u=/nm/ 20021122/wr_nm/media_parsons_dc

AOL Time Warner CEO to Sullen Execs: ‘Get Over It’ Fri Nov 22, 6:58 PM ET

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By Reshma Kapadia

NEW YORK (Reuters) – “Get over it.” That is what AOL Time Warner Inc. (NYSE:AOL – news) Chief Executive Richard Parsons has told company executives angered by the decline in the media giant’s stock price as he tries to refocus them on the future.

Some employees inside the world’s largest media company could be characterized about six months ago as “sullen but not mutinous” amid disappointment over AOL’s $106.2 billion purchase of Time Warner but now many of them are moving to acceptance, Parsons said at a Variety media conference here.

Parsons said he has had various conversations with executives who feel they have been “screwed” by the deal as the value of their portfolios and options sink amid the 55 percent drop in the company’s stock this year.

“I say to them you have to get over it because you can’t go back and undo the past,” Parsons said. “The challenge we all have is how to figure out how to build value back in the company. If you really really can’t get past that, then you have to go somewhere else.”

The company has suffered from weakness at its America Online unit, which has been mired in slow advertising spending and subscriber growth and federal accounting probes, as well as the failure to deliver on the promises made after the merger.

Many AOL Time Warner employees have left, especially AOL veterans, but Parsons said the company is making progress on priorities he set out this summer including regaining credibility with investors, simplifying the company and fixing America Online.

“Getting (AOL) back on track –stabilizing the business and putting it back on the growth track — we think we are at a point where we have confidence we can do that,” Parsons said, ahead of a Dec. 3 meeting when executives try to convince Wall Street. “But then there is the execution part.”

TASTES GREAT, LESS FILLING

Going forward Parsons said the priorities include running the businesses well and improving collaboration between the divisions — from America Online, music and publishing to the networks, film and cable systems — instead of each unit’s management trying to protect their own profit/loss.

“To some extent this is a tough turn to make because the media either wants to put you in two categories: it tastes great or it’s less filling,” Parsons said. “What we need to do is run business and run well and extract additional value out of the portfolio of businesses. That’s the challenge for us.”

Much has been said about the company’s failure to date of getting its many fiefdoms to work together, but Parsons said AOL Time Warner has to create an understanding of what it is trying to achieve overall so each unit understands — instead of forcing “synergies” down each division.

“We can’t order them (to collaborate), but can we make the case to employees that if they do things this way the result will better for all,” said Parsons, often characterized in the industry as a consensus builder.

Avoiding deals that would complicate its corporate structure and reducing its $28 billion in debt are also Parsons’ priorities as he tries to turnaround the company.

Parsons, a former Time Warner veteran who took the helm this summer after Gerald Levin resigned, sought to distance himself a bit from his predecessors.

He acknowledged that he had some doubts about the 30 percent growth targets set out after the merger — the targets the company severely missed and that have led to much of the investor discontent.

“(In the 1990s) growth became this enormously important thing and (people) would throw out growth targets without looking at what was under that. You can’t grow a company our size with $40 billion in revenue and a target of growing it 30 percent a year. That’s not the real world (news – Y! TV).”

———–

-Ian.

—-

The Wall Street Journal Copyright (c) 2002, Dow Jones & Company, Inc. Tuesday, October 1, 2002

Five Music Concerns To Pay $143.1 Million In Price-Fixing Case Reuters News Service

NEW YORK — The world’s five largest music companies and the three largest music retailers will pay $143.1 million to settle a CD price-fixing case launched by New York and Florida two years ago, New York State Attorney General Eliot Spitzer said yesterday.

In August 2000, most U.S. states joined in a lawsuit alleging that an industry practice called “minimum advertised pricing” (MAP) artificially inflated the price of CDs between 1995 and 2000, violating federal and state antitrust laws. Under MAP, the labels subsidized advertising for retailers that agreed not to sell CDs below a certain price.

The five record labels — Vivendi Universal’s Universal Music Group, Sony Corp.’s Sony Music, Bertelsmann AG’s BMG Music Group, Warner Music Group, a division of AOL Time Warner Inc. and EMI Group PLC — and the three retailers, Musicland Stores Corp., Trans World Entertainment Corp. and Tower Records, agreed to stop using MAP policies as part of the settlement.

The companies, which didn’t admit any wrongdoing, will pay $67.4 million in cash to compensate consumers who overpaid for CDs between 1995 and 2000. The companies also agreed to distribute $75.7 million worth of CDs to public entities and nonprofit organizations throughout the country.

———–

DULLES, Va. — AOL Time Warner Inc.’s America Online Inc. (NYSE:AOL – News) unit streamlined its management structure in hopes of increasing accountability at the online giant, while setting clearer priorities and clarifying its organization roles.

ADVERTISEMENT The changes, which had been expected, would eliminate the president and chief operating officer posts, while giving recently appointed Chairman and Chief Executive Jon Miller a more direct role in overseeing America Online’s key units.

In addition, the maligned Business Affairs division will be disbanded, with employees reassigned to the business units they support. The group, which arranged long-term sponsorships and marketing partnerships with advertisers, has come under criticism for the way it crafted deals, some of which are under investigation by the government regulators looking at how the booked revenue was recorded.

The company said a month ago that America Online may have improperly recognized $49 million of revenue over six quarters and is combing through its books for any other possible errors.

Mr. Miller has his hands full, with America Online reeling from plunging advertising revenue, slowing subscriber growth and probes into its accounting practices by the Securities and Exchange Commission and the Justice Department.

Mr. Miller, who last month became the third CEO of the Internet unit this year, will take a more direct role in the America Online brand, interactive marketing and broadband units.

“AOL must maintain its leadership position among dial-up subscribers, enhance our broadband business and reinvigorate our relationship with marketers,” he said in a prepared statement. “To do this, we will fully leverage our programming and product expertise, along with the superior technology behind our unmatched member experience, to create exciting, relevant and distinctive new products and content that will change the way both dial-up and high-speed consumers think about AOL.”

As part of the restructuring, current America Online COO J. Michael Kelly will become chairman and CEO of America Online International, will oversee the company’s AOL Anywhere products — which focus on wireless access to America Online — and report to Mr. Miller.

“Mike Kelly’s appointment signals the priority I’ve placed on our international and AOL Anywhere businesses,” Mr. Miller said.

Chief Financial Officer Joseph Ripp will become vice chairman and other corporate and operating functions, including AOL’s network infrastructure and technology operations. Current Vice Chairman Ted Leonsis will head newly created councils overseeing brand, product and technology strategy.

The two will also join Mr. Miller, James de Castro, interactive services president and the person who oversees the America Online Internet service, and Don Logan, chairman of AOL Time Warner’s media and communications group, in a new senior strategy group.

Mr. Ripp, America Online’s CFO since the company’s acquisiton of Time Warner Inc. in early 2001, will keep that role until a replacement is named. Mr. Kelly became America Online’s chief operating officer in November.

Mr. Miller also said that America Online President Ray Oglethorpe recently told the company he would retire after serving as a senior adviser during an undisclosed transition period, and that Vice Chairman and Chief Marketing Officer Jan Brandt will step down from those posts and take on a new part-time role as a senior adviser.

-Maria P. Vallejo; Dow Jones Newswires; 201-938-5400 and Kevin Kingsbury; Dow Jones Newswires; 609-520-4367

———–

NEW YORK (AP) – AOL Time Warner Inc. is buying out AT&T Corp.’s stake in their cable television, moviemaking and programming partnership for an estimated $8.5 billion to $9 billion, and said it may sell a stake in its cable TV operations in an initial public offering as early as next year.

The deal announced Wednesday involves the decade-old Time Warner Entertainment partnership, which includes most of AOL Time Warner’s cable TV systems and its Warner Bros. film studio, its Home Box Office pay-TV service and other programming businesses.

The two sides have been in discussions for some time on unwinding the partnership known as TWE. AOL Time Warner owns about 72.4 percent of the partnership, and AT&T owns the rest.

The deal gives AT&T cash and readily saleable assets, while AOL Time Warner avoids having to buy its partner out for cash at a time when it is struggling under a heavy debt.

In morning trading on the New York Stock Exchange ( news – web sites), shares of AOL Time Warner rose 69 cents to $14.05, while AT&T gained 54 cents to $11.72.

Under the terms of the deal, AT&T gets $2.1 billion in cash and AOL Time Warner stock valued at $1.5 billion, as well as a 21 percent stake in the Time Warner Cable Inc. business in exchange for its stake in TWE.

While AOL Time Warner didn’t affix a value to the cable stake, The Wall Street Journal said it would boost the total value that AT&T is getting in the deal to between $8.5 billion to $9 billion.

For its part, AOL Time Warner gets full ownership of Warner Bros. and HBO and stakes in the TV channels Comedy Central, Court TV and The WB Network.

In addition, AT&T and Comcast have agreed to make America Online’s high-speed version of its Internet service available on Comcast’s cable systems. That type of arrangement could give AOL access to more customers.

The stake in the cable business should benefit Comcast Corp., which is buying AT&T’s cable TV businesses and would inherit AT&T’s stake in TWE. The former Time Warner created the TWE partnership in 1992.

The cash, AOL stock and Time Warner Cable shares will go to Comcast if that company completes its AT&T cable operation before year’s end, which is expected.

AT&T and Comcast will get an immediate influx of cash and will be able to sell its stakes in both AOL Time Warner and the new cable business in the future to generate more money.

AOL Time Warner chief executive Dick Parsons said the deal was “the best possible outcome for our investors” and will simplify its overall structure.

“AOL Time Warner will recapture total ownership and control of its content businesses, enabling us to manage this portfolio of assets for maximum value. And all of the company’s state-of-the-art cable assets will be combined for the first time into a well-capitalized, pure-play cable company,” he said.

AOL plans to conduct an initial public offering of part of its stake in the Time Warner cable business soon after the restructuring in completed in early 2003.

That would enable it to pay down the debt incurred in making the $2.1 billion cash payment to AT&T, AOL said.

“The fact is that AOL or Time Warner has had managerial control of all of the assets within TWE since 1999,” said Katherine Styponias, an analyst at Prudential Securities. “So it’s not as if being completely owned by AOL is going to mean things are going to change radically. Nevertheless, it’s one less thing to worry about when trying to put a value on the company.”

———–

Of course, neither IIA nor eVoice could be held responsible for how their acquirer accounted for the purchase cost or what AOL did with their revenues. Fortunately, eVoice had no revenue to speak of so that helps things a little..

-Ian.

—–

http://www.nytimes.com/reuters/technology/tech-media-aol- restructuring.html

AOL Restructures Business Affairs By REUTERS

Filed at 4:36 p.m. ET

NEW YORK (Reuters) – The first target of a major restructuring at the online division of AOL Time Warner Inc.(AOL.N) is the business affairs operations of America Online, whose accounting is at the center of federal inquiries, a company source said on Thursday.

The deal-making group struck many of AOL’s advertising and commerce pacts that are now the subject of an internal review as well as inquiries by the U.S. Securities and Exchange Commission and Justice Department.

After standing by AOL’s accounting for weeks, AOL Time Warner disclosed on Wednesday that AOL may have overstated revenue in three deals totaling some $49 million over a period of about 18 months. The disclosure came as a caveat as the media giant’s top executives certified its financial results.

AOL’s shares closed up more than 7 percent, or 81 cents, at $11.85 on Thursday as investors breathed a sign of relief that the disclosure so far was not bigger.

“It seems the disclosures were fairly benign in the grand scheme of things and you would think this was their last opportunity to get any skeletons out of the closet,” said Jon Friedland of investment firm porter Felleman.

The top brass of hundreds of America’s biggest companies swore by their financial results on Wednesday under a government order meant to reassure investors.

AOL Time Warner has begun an internal review of AOL’s deals, which is seen completed by the end of the third quarter.

Chief Executive Richard Parsons said in a memo Wednesday that Time Warner veteran Don Logan and new AOL chief Jon Miller planned to implement a new structure for AOL in a few weeks.

“There is no room at this company for any unethical behavior,” Parsons said in the memo, encouraging employees to raise concerns about conduct to supervisors.

OVERHAUL COMES AFTER LEADER OUSTED

The overhaul of the online division comes as weakness at AOL, once called the company’s “crown jewel,” has offset growth at AOL Time Warner’s other branches such as film and cable.

The business affairs restructuring comes in the wake of the ouster of its former head, David Colburn. A company source said Colburn, a brash, aggressive AOL veteran that set the tone for the group, was on his way out as Miller began reviewing the organization, but the disclosures accelerated his exit.

Lance Conn, a senior vice president for AOL’s business affairs, who most recently was working in Europe, last month was given many of Colburn’s responsibilities.

The restructuring of the deal-making group, which had topped 100 employees and was known as a close-knit, hard-hitting bunch, will likely decentralize it and shift many of its employees to other units, a company source said.

As the new team reviews how to run the AOL, some of the changes implemented in the early days of the merger could be dismantled, industry insiders said. At that time, the focus was on creating synergies and selling advertising across all of AOL Time Warner’s properties.

“It’s going to be more from a strategic perspective on how to approach the ad and commerce business,” said CIBC analyst Mike Gallant.

Several AOL veterans have already left or taken a back seat — including top ad man Myer Berlow — and others may yet leave as part of the pending shake up.

MORE DISCLOSURES ON TAP?

Even though AOL’s shares rose, some analysts recommended investors stay on the sidelines, citing the possibility AOL may uncover more cases of inappropriate revenue recognition.

“They were under pressure to meet their certification deadline; they found language they wanted to use to couch their certification,” said Jacob Frenkel, an attorney at Smith, Gambrell & Russell and former SEC lawyer. “Until the internal investigation is complete, you do not know.”

The three deals AOL discovered were not part of the transactions discussed in a series of Washington Post articles last month that caught regulators’ attention, the source said. The company declined to comment on details of the deals.

The deals highlighted in the Washington Post, which were struck in 2000 and 2001, totaled about $270 million and showed, for example, how AOL sold ads on behalf of eBay Inc.and then booked the sale of those ads as its own revenue.

“If that’s the only bullet I’ve got to take, I can live with that,” Gallant said. “But I just can’t get comfortable that the issue is behind us because they are continuing to review all their ad and commerce transactions and the SEC and DOJ investigation continues.”

———–

> From: “Jim Whitehead”
> Date: Tue Jul 23, 2002 01:27:06 PM US/Pacific
> To: “FoRK”
> Subject: AOL scaling back IM interoperability
>
> 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 [at] dowjones [dot] com
>
> Copyright 2002 Dow Jones & Company, Inc.
> All Rights Reserved
>
>
> http://xent.com/mailman/listinfo/fork

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http://biz.yahoo.com/ri/020715/health_drkoop_1.html

Monday July 15, 12:00 pm Eastern Time

Reuters Internet Report Former Internet Darling DrKoop.com Sold for $186,000

BOYNTON BEACH, Fla. (Reuters) – DrKoop.com, the online consumer health information pioneer that rode the Internet frenzy from boom to bankruptcy, on Monday was bought by Vitacost.com, a seller of health-related products over the Internet, for $186,000, Vitacost said.

At one time worth more than $1 billion, DrKoop.com — founded in 1997 by former U.S. Surgeon General C. Everett Koop — fell into bankruptcy in December as it struggled to turn public interest in its online health information into a reliable revenue stream.

Vitacost, a privately held company based in Boynton Beach, Florida, sells health and nutrition products over the Web.

Vitacost paid $186,000 in cash for DrKoop.com’s assets, which included the brand name, trademarks, domain names, the Web site, and the e-mail addresses of its registered users.

The site attracts more than 900,000 visitors a month and has a database of more than 2 million registered users, Vitacost said in a statement.

DrKoop.com became a case-study for the roller-coaster ride of the dot-com era. Unveiled with a splash as Empower Health, the company sank into a cash crisis barely a year later, only to find an angel investor who provided enough backing until the company could sell itself to the public in 1999 as DrKoop.com.

The float brought in about $88 million even though the company had tiny revenue and was $15 million in the hole. It didn’t stop DrKoop.com from moving in to plush new headquarters in Austin, Texas, following the IPO.

Amid the portal rage of 1999, DrKoop.com signed a multimillion-dollar deal with Walt Disney Co. (NYSE:DIS – News) and its Go site, which eventually would be shuttered. It also agreed to pay America Online, now a unit of AOL Time Warner Inc. (NYSE:AOL – News), an enormous sum to provide health information to its users.

Those types of deals eventually would be mocked on Wall Street, but were an Internet mainstay at the time.

The site’s main commodity, Dr. Koop himself, began to suffer when he faced questions about his ethics in a front-page story in The New York Times about how Koop was earning commissions for products sold on the site.

By 2000, DrKoop.com’s auditors had serious doubts about the company’s ability to survive as it piled up debt. Directors dumped shares, mass layoffs began and the stock sank to less than $1.

Vitacost now boasts about the more conservative approach it took than its online peers did.

“In fact, we did not have and do not have one venture capitalist investor nor did we do an IPO,” Vitacost President Allen Josephs said.

Vitacost has achieved profitability and is using the money to buy brands like DrKoop.com, he added. The company still sees medical information as a burgeoning area on the Internet.

“Consumers are increasingly hungry to educate themselves about how both mainstream and natural or complementary medical practices can enhance their personal health and wellness,” Josephs said.

He said he hopes to achieve DrKoop.com’s original promise — of becoming the most trusted repository of medical information on the Internet.

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