Fast Forward by Rob Pegoraro, Personal Tech Columnist

In a Broadband World, AOL Forced to Open the Gates

By Rob Pegoraro
Friday, August 4, 2006

America Online surrendered to the Internet on Wednesday.

The service isn't shutting down, nor is it going to turn down your money if you still prefer to pay AOL for an online connection. But by announcing that it will give its basic service for free to anybody with Internet access, it's giving up on its long experiment in building a gated community online.

The Dulles-run online service once stood atop, and apart from, all other Internet providers. You could only connect to it with AOL's own software, delivered to you via those ubiquitous free CDs.

Once you were greeted by the usual "Welcome!" and "You've got mail!" announcements, the world of AOL was far different from the sprawling, uncontrolled environment outside it. Order prevailed -- well, except in the user forums and chat rooms. And if you did want to roam into the wild Web, AOL offered that, too.

When getting on the "real" Internet involved thumb-tacking together different programs and fiddling with inscrutable settings -- and when the Web was a tiny fraction of its size today -- the AOL formula worked. The service provided an easy-to-digest online experience and did so better than such competitors as Prodigy and CompuServe.

By the late 1990s, the company seemed unstoppable. In 1998, Wall Street Journal columnist (and before that, Washington Post tech reporter) Kara Swisher wrote a book about AOL, "," and gave it the breathless subtitle of "How Steve Case Beat Bill Gates, Nailed the Netheads, and Made Millions in the War for the Web." (Netheads to AOL: Who's laughing now?)

AOL kept growing, peaking at 27 million subscribers in 2002. But it was disregarding two trends that would end its reign: the growth of broadband Internet access and the increasing usability of other Internet programs.

It's not that AOL didn't have a broadband strategy -- it had too many of them. Either it was going to sell its own high-speed connections via cable modems or digital subscriber lines, or it was going to have existing broadband providers bundle AOL with their own services, or it was going to ask people to pay extra for AOL on top of a broadband connection from somebody else.

Meanwhile, it got less painful to get online with other companies, thanks to their successful attempts to bring some of AOL's ease of use to industry-standard software. And the parts of the Internet that became increasingly hostile -- spam, spyware, viruses and phishing scams -- were beyond the power of AOL or any one online provider to fix.

A glut of AOL discs in mailboxes and slick AOL ads on TV couldn't fix those problems. Subjecting departing subscribers to lengthy interrogations by AOL's "customer-retention" phone reps didn't work either.

The customers kept heading for the exits, even if that meant giving up e-mail addresses they had used for years -- then tinkering with extra software to get their saved e-mail and Web favorites out of AOL.

It's somewhat amazing that after half a decade of a decaying business model, 17.7 million people still subscribe to AOL. But that's nearly a million fewer than three months ago. With trends like that, AOL has chosen the only viable option: Give the people what they want. If they don't want to pay for AOL, don't make them.

Those who do want to keep the company as their online connection can pay far less -- $9.95 a month for unlimited use. Those who want to switch to another Internet service can use AOL for free -- though tech support will still cost $9.95 a month.

Equally important, as of next month you won't need to run AOL's software to use its services. AOL's own Web site and (since 2004) its e-mail have been accessible via standard Internet programs, but by September all of the online service's content -- including the kid- and teen-oriented areas that have remained proprietary -- will be open to the world.

That may very well work; Google (a mere Stanford University research project back in AOL's glory days of 1998) shows how well a company can draw in users with free and useful content. But what if it does? In this best-case scenario, AOL will be just another Web site.

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