Instant messaging competitors criticize AOL stance

NEW YORK (Reuters) -- America Online Inc., whose instant messaging system dwarfs all its rivals combined, is dragging its feet on allowing users of other services to chat real-time with AOL's millions of members, a group of 16 AOL competitors said on Friday.

AOL rivals complain that the No. 1 Internet services provider, which has agreed to merge with media giant Time Warner Inc., has a virtual stranglehold on the instant messaging (IM) market with its AIM and ICQ services. Time Warner is the parent company of CNN.com.

AOL's huge reach discourages consumers from signing up with competitors under the current closed regime, which cuts other IM users off from AOL members, industry watchers said.

In June, AOL told U.S. regulators it supports allowing its IM system to work with others but said protecting the privacy and security of its consumers was its top priority until industry standards were created. AOL was responding to questions on a variety of issues the Federal Communications Commission posed in its review of the Time Warner deal.

In a policy paper released on Friday, ExciteAtHome Corp., Microsoft Corp.'s MSN and 14 other companies criticized AOL's response to the FCC, urging the industry leader to take a more proactive role in resolving the issue and to set a timetable for the launch of open standards.

"There is no evidence of effort with an attempt to come up with a solution," said Ross Bagully, chief executive of CMGI Inc.'s Tribal Voice unit, referring to AOL's FCC response. "There is no commitment like a time frame ... and no protocol that they would be willing to adapt." Tribal Voice, one of those that signed the paper, offers a competing IM service.

The paper, which comes a week before the FCC holds a public hearing as part of its review of the AOL-Time Warner merger, now valued at about $133 billion, also said Dulles, Virginia-based AOL had not clearly demonstrated how opening up its systems might pose privacy and security concerns.

In addition to the response to the FCC, AOL has submitted a proposal to the Internet Engineering Task Force about "interoperability" of IM services. AOL has repeatedly said it is committed to interoperability in principle as long as that poses no threat to the privacy and security of its members.

"AOL's submission to the IETF is crystal clear about how the industry can get to true, worldwide interoperability while protecting consumers' privacy and security through a server to server approach. Our proposal protects consumers and we will continue to work with the IETF and all those serious to true interoperability," said Kathy McKiernan, a company spokeswoman. Creating standards takes time, so taking issue with the lack of a timetable in AOL's submissions and other criticisms "are petty issues," said Lydia Loizides, an analyst at research firm Jupiter Communications.

"They are the clear market leader and others are running behind them to catch up or get them to open up their networks," Loizides said, about AOL. "The question from AOL's standpoint is what is the value to standardization. All these other players don't even make up a quarter of users that AOL has."

Earlier this week, Microsoft launched a new version of its online messenger software that offered free long-distance Internet phone service, in an effort to turn up the heat on AOL, which has about 50 million messaging users compared to Microsoft's 18 million.

While some analysts had hoped AOL would shed more light on its plans for IM and cable in its earnings conference call Thursday, AOL did not reveal very much.

"By not doing anything now, AOL is not losing anything because broadband is deploying slowly and they have agreed in principle to open access and, as of yet, they are not being pressured by regulators," said Youssef Squali, an analyst at ING Barings, adding that the company was leaving the details in their back pocket when they become needed.

"Everyone is taking shots at AOL, whether it be Disney from the content side, or Microsoft and this group on the IM side. It's a testament to AOL's success and the threat that it is to its competitors," Squali added.

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