instantmessagingplanet.com
May 6, 2003
As reported on InstantMessagingPlanet.com:
Two former Federal Communications Commission (FCC) officials have blasted AOL Time Warner’s request to offer instant messaging-based services such as the IM videoconferencing like those available through rivals Microsoft and Yahoo!.
As part of the FCC’s 2001 conditions on the AOL-Time Warner merger, the media conglomerate agreed to hold off on advanced, high-speed IM services until its instant messaging network became interoperable with rival systems -- or until AOL no longer dominated the IM market. The Commission feared that AOL would use its sizable lead over Microsoft’s MSN Messenger and Yahoo! Messenger to gain an unfair monopoly on more advanced, broadband-centric services -- like videoconferencing -- that it could roll out on top of its IM network.
While AOL has yet to establish server-to-server interoperability with rivals, it claims it no longer dominates the IM industry. At the time of the merger, the company controlled almost 100 percent of the market, but since then, according to Media Metrix, its share has fallen to approximately 59 percent. Microsoft now claims 22 percent of the market, while Yahoo! is thought to have about 19 percent.
Nevertheless, University of Pennsylvania Profs. Gerald Faulhaber and David Farber say the numbers do not present a "compelling" case for the FCC to give AOL the OK to deploy advanced services. Faulhaber was the chief economist at the FCC at the time of the historic merger, while Farber served as the Commission’s chief technologist.
"Clearly the most immediate impact of adopting interoperability is to make your customers better off," Faulhaber and Farber wrote in their petition to the FCC. "By denying its customers interoperability, AOL Time Warner is denying them access to more than 40 percent of the IM market. The only reason it might want to deny these benefits to its users is if by doing so it denied even greater benefits to the customers of it competitors, which is exactly what market tipping is all about."
The two also claim, "AOL Time Warner has a very easy way to demonstrate that it is no longer dominant in IM: offer to interoperate with their competitors. If they are truly not dominant, then this is their best strategy. But if they are dominant (as they claim they are not), then they would refuse to interoperate (which is what they are actually doing)."
In addition to arguing that its reduced market share should allow it to enter the high-speed IM market. AOL Time Warner, in its petition, also cites the free cost of public IM as a second example of how the marketplace is competitive. But Faulhaber and Farber disagree, claiming that providing consumers with free instant messaging, at worst, could be a strategy to control the market.
"On the face of it, this cannot be evidence that the market is competitive," they wrote. "There are two possible reasons for a zero price: the firm is attempting to build market share quickly in order to obtain proprietary network effects and tip the market in its favor; or the firm offers the service as a feature of a broader service (such as AOL ISP service) without charge. Either one may be perfectly valid, but it is disingenuous to claim that a zero price ’proves’ the market is competitive."
Monday was the deadline for filing comments on the AOL TW relief request. The company now has until May 20 to respond to Faulhaber and Farber’s charges.
Read the complete article on InstantMessagingPlanet.com
05-06-2003, 01:00 AM
