Nolle's column: What the AOL/Netscape deal really tells us

The America Online/Netscape Communications deal proves that we've missed some key truths in the way we've looked at the Internet. It also tells us that we'll be looking at a very different kind of Internet in the future.

Everyone wants to see the Net as an exploding social and technological revolution. If so, it's a selective revolution. While stock values of companies such as Amazon.com and Yahoo have been soaring into the stratosphere, ISP stocks have been positively pedestrian.

The trouble with the ISP business is that everyone is thinking up things that can be done for free on the Internet. Push technology companies want to push information to you. Retailers want to sell to you. You get support for products on the World Wide Web. You get help for your social life on the Web.

Now people want you to move your private network applications onto the Internet. The pushers, sellers, chatters and tunnellers will all make money, but the poor ISP gets nothing but more traffic -- traffic that, in a flat-rate model of Internet pricing, doesn't earn the ISP a cent.

Here's where AOL comes in. Why is AOL buying Netscape instead of a company such as PSINet, Concentric Network or UUNET Technologies? The answer: advertising. Among the online providers, only AOL offers a controlled client interface. With standard Web browsers, you decide which pages to visit and view content only from those pages. With AOL's controlled client, you see ads when it wants you to see them. This scenario means that AOL can sell ad space, something Yahoo and Amazon.com can do as well, which is why their stocks are flying high.

Ad space is how you get television programs. Ad space is how you get this publication. Selling ads is lucrative enough to support the whole broadcast industry. It's enough to send stock values of search engine firms skyrocketing. It's what AOL could do that other ISPs can't, and ISP advertising is coming to you.

AOL and Netscape say their cooperation will facilitate electronic commerce. E-commerce as in Web sites that promote product sales? Been there, done that. E-commerce as in ordering online? Done that, too. What we haven't done is figure out a way to push commerce-inducing advertising to everyone. Many of the basic tools are there in enhancements to browsers such as Java, but the details need to be developed. You can bet that when AOL and Netscape talk about e-commerce, it's e-advertising they are really focusing on.

Before you pull out your protest signs from the 1960s and start picketing, consider two facts. First, the Internet really has been about commerce and marketing from the start. How many sites, of the millions of Internet hosts, are really there just to educate humanity, and how many are there to sell something to humanity? All AOL/Netscape will do is let ISPs cash in on the process a little.

That leads to the second fact: Without some form of subsidisation, the Internet isn't going to spread to every home and grow in access speeds to the megabit level.

People just won't pay enough to ensure the survival of the ISPs, and ISPs are as essential to the Internet as Web content and users. But ISP advertising revenue could make up the difference between what we'll pay for Internet service and what the ISPs need to charge to be profitable.

The television analogy suits the Internet better than you may think. You can get commercial-free television two ways: public television, which is contribution or tax subsidized; and pay-per-view. The same will eventually be true for the Internet.

Users who pay for the privilege will receive fast access, no advertising -- whatever they want. The rest will have to watch the network channels, meaning they'll have an interface to the Internet that enables push advertising to intrude on their experience.

Users will also be limited in what they can access. Basic Internet service in the future will be the 'Net with commercials and nothing more . . . unless ads can be sold in chat rooms and via e-mail.

So what do we do as AOL and Netscape prepare to step into this commercial-dominated future? The answer: think and pay. We've all been captivated by a lot of advances in the Internet that are completely unrealistic in a business sense. Digital movies on the Internet via digital subscriber line? Sure, for a couple of thousand dollars per month -- or a couple of thousand commercials.

We want to believe those who say bandwidth is free or that somehow rolling public telephony and other applications onto the Internet is going to eliminate the "pay or watch the ads" trade-off.

Because we won't face reality, we can't hope to guide progress toward it. AOL and Netscape are sounding a warning: Regulate the commercialisation of the Internet or let the sellers do it for you.

Choose. Time is running out.

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