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AOL blackout sheds light on industry

America On Line

August 9, 1996
Web posted at: 7:30 p.m. EDT

From Correspondent Brian Nelson

ATLANTA (CNN) -- American Online is up and running again after suffering an embarrassing crash in cyberspace. But the on-line service still has reason to worry.

When America Online goes off-line -- as it did Wednesday in an outage that lasted 19 hours -- it risks having 6 million disgruntled subscribers on its hands.

The nation's largest on-line service is no longer just a handy-dandy research tool for mom and dad and the kids. Many companies rely on it to conduct business.

"At $2.95 an hour, we receive a share of that, when AOL is down 19 hours, we are losing money," said Patrick Thorne, president of Federal Information and News Dispatch, a small Washington-area company that posts federal contracts up for bid on AOL.

"We had calls from everything from software development companies to defense contractors," said Thorne. "It can impact many, many kinds of businesses -- both large and small,"

In a statement to subscribers, AOL apologized for the lengthy blackout. Still, AOL Chairman and CEO Steve Case said he could not offer assurances there would be no repeat of the system failure, which occurred during routine maintenance.

But in an effort to put a silver lining on this off-line cloud, Case said the breakdown was a reminder of how important AOL is becoming in our everyday lives.

On-line services compete for clients

And not just AOL. The Internet is developing into a mainstay, and cyber junkies are finding there are plenty of other on-line services out there, many with on-line fees significantly less expensive than AOL.

"It is not a good time for AOL," said Esther Dyson, president of EDventure Holdings and one of the leading observers of the digital revolution.

People are signing up in droves for America Online, but at the same time, she notes, others are leaving in droves. It's a pattern that was established long before the blackout, Dyson said.

"What's happening with AOL financially is that they are spending an awful lot of money to generate new subscribers, and a lot of those subscribers are not sticking around very long," she said.

AOL's experience is a reminder that life on-line is precarious. Technology changes in a heartbeat. Customers move on. And Wednesday, the nation's foremost on-line service looked like the old power company on a bad day.

But there is a consolation for AOL customers: They'll be getting a one-day rebate.

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