Who will dominate the Internet?

Major telecom firms challenge online services, but with infrastructures in place

The nation’s online services had better watch their backs.Speculation abounds about the long-term viability of America Online, Compuserve and other online services, given aggressive Internet marketing by the country’s huge telecommunications companies.
Content-driven customers also can now find ample material on public Web sites, or can purchase information on an as-needed basis. Many observers also believe that online services spend too much money on content development and not enough on infrastructure, which is why connection speed is slow and why customers get more than the occasional busy signal.
Some theorize that because major telecommunications companies such as Sprint, AT&T, and MCI now offer Internet access, online services will eventually lose their market share because the Big Three go after the same market as the online services while already boasting ample infrastructure.
“This is not a shrinking pie,´ said Alan Clark, spokesman for MCI Internet, when asked about major telecommunications companies’ impact on online services. “Only 10 percent of the population have Internet access today, so clearly there’s enough room in the market for everyone right now.”
Clark believes that customers will come to MCI because of the special services it provides. MCI has nationwide coverage, so if you travel a lot and use your e-mail to communicate with the office, you can access the more than 300 local dialups around the country, or use (800)-number access.
MCI was the first of the telcos to introduce single billing, where you can get one bill for Internet access, long distance, pager, cellular phone, and eventually, local dial-tone service.
“MCI responded to research which said that customers would like to streamline their communications billings by offering single billing,” Clark said. “Our service appeals to people who don’t need a whole lot of help, but are looking for other services, like convenience.”
Jeff Schafer, spokesperson for Sprint Internet Passport, notes that Sprint has been involved with the Internet for a long time, being one of the major backbone providers along with MCI and UUNet.
“Frankly, Sprint waited to enter the mass consumer market because we didn’t feel like the market had defined itself enough yet,” Schafer said.
Sprint debuted Internet Passport to the public just recently, with their major focus on the new user market.
“We watched the other players in the market so we could avoid their mistakes and come out with a profitable consumer product,” Schafer said.
Sprint sees its Internet service as just one more companion product the company can offer to its existing franchise of 15 million customers.
Don Heath, executive director of the Internet Society, cautions against making statements on the future market of the Internet. The Internet Society is a Reston, Va.-based international organization for global cooperation and coordination for the Internet and its Internet-working technologies and applications.
“Anything anyone tries to predict vis-Æ-vis the Internet usually looks very naive within a few months,” Heath said. “Nonetheless, I do believe that in the long run, the telcos and PTT’s of the world will be the major Internet forces. Why? Because they have the financial wherewithal and the infrastructure capabilities to do so. Further, there is not much question in my mind that the Internet or whatever we may call it in the future, will be the source of ‘universal communications’ and the telcos will simply have to be involved if they want to survive into the future.”
Sprint spokesperson Schafer feels that America Online is still a very viable player in the market, although Sprint does have an interest in America Online – they are one of Sprint’s largest customers.
Jeff Moe, president of Verinet Communications, a local Fort Collins provider, disagrees.
“AOL is going to have trouble because content providers have (World Wide) Web access now. You used to not be able to get magazines anywhere but AOL, but now all the publishers have their own Web sites,” Moe said.
Verinet did have a surge of new subscribers after AOL’s busy signal problems.
“The more the public learns about the Internet, the more they’ll turn to smaller companies,” he said. “It used to be that AOL was the most user-friendly way to go, but now the software we provide is user-friendly, and people can be online in no time.”
As far as the major telcos are concerned, Moe thinks they will always be players because they wield so much power and have a lot of money to spend on infrastructure and advertising.
Heath brings up some additional points to consider.
“Let’s not count on those companies that are driving this thing today,” he said. “AOL could emerge as a significant player; they could be bought by some other larger entity and survive in this new form. The drivers of where the Internet is going are not the telcos, they are the Microsofts, the AOLs and some telcos. This is a dynamic situation, and it changes daily.”
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