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Case: AOL alive and well

For a decade, America Online's critics have predicted death for the online service, but chief executive Steve Case points out that so far, they've all been wrong.

NEW YORK--Will Steve Case get the last laugh?

For a decade, the America Online chief executive says, critics and rivals have predicted death for AOL's online service, only to take their words back. Whether it's the threat posed by Microsoft or that of AT&T, many observers say AOL is in constant danger of becoming a memory of what it once was.

So far, AOL has proved all of them wrong. Instead, it has become the beacon that many Internet newcomers look to as a success story. As a result, AOL has transformed from a techie's punch line into a $125 billion juggernaut.

But can Case hold it all together? Every year, AOL's competitors seem to get bigger and smarter.

Even though Microsoft has made many unsuccessful attempts to outsmart AOL, for example, the software giant has a history of getting it right in the long run.

It also remains to be seen whether AOL can get into providing cable-modem service, which many predict will be the future of Net access. The company may have to do a deal with AT&T to gain access to its cable lines. But at what cost?

CNET interviewed Case here during the company's launch for AOL 5.0 to find out whether the chief executive is still laughing. It seems like there are more and more competitors for AOL year after year.
Case: I don't feel like there's dramatically more competitors now than there were in the last ten years. There's always been competitors.

When we went public seven years ago, TCI's John Malone [now Liberty Media CEO] was talking about 500 channels, and everybody thought the TV would be the way to access stuff and the PC would be irrelevant. Six years ago Time Warner launched Pathfinder, and everybody thought the media companies would emerge as the dominant force, and that really didn't happen.

Five years ago Microsoft was gearing up for the launch of MSN, and everybody said they'd kill us, and that didn't quite happen. And four years ago the Web emerged, and everybody said 'ISPs are the future' and AOL was the past, and that didn't really happen. Three years ago everybody said push technology was the next big thing, and that didn't really happen.

We've always had a lot of competitors; we've always had a lot of threats. We also had a lot of opportunities. There's certainly a lot of stuff happening, but we're in the epicenter of that.

It seems the big question right now is access. How do you see broadband playing out? Do you have to do a deal with AT&T to get into the cable-modem access business?
I don't think we have to, but we'd like to.

What is preventing you from doing a deal with AT&T?
We just haven't been able to agree on what the deal should be. That doesn't mean that should be the case with everybody.

Early on, the cable companies generally felt like it would be in their interest not to have AOL as a partner and instead tried to replicate AOL. And now I think there's a shift in their thinking, and they are more eager to have our support--partly because their growth has been slower than some might have thought in terms of cable modems, and partly because we do have lots of customers, and we'll have to upgrade customers to broadband. And they started to say, 'I guess we'd rather have them go to cable than to phone or satellite.'

I do think that there's this growing recognition that it's important to keep the Internet competitive, and therefore it is important to have open access.

But [cable companies] seem to be more interested in talking to us than before. And hopefully at some point we'll be able to work something out. But it's got to be good for them, it's got to be good for us, and it's got to be good for consumers.

Is AT&T trying to push off Excite to give access to their cable lines in return, as sources allege?
I'm not going to get into the nitty-gritty or any discussions. But we have a continuing dialogue, and we'd like to do something that makes sense to everybody. And if it takes a while, we'll be patient.

It seems like Microsoft is getting more serious, what with the second coming of MSN. How do you view their moves and their revival of MSN?
I don't think it's the second coming, I think it's the third or fourth coming. It's a little surprising that they haven't hit the mark yet, but that doesn't mean they won't in the future. We have a lot of respect for them.

Meanwhile, we will have to continue to innovate and improve our products. Five years ago, when the first MSN threats emerged, we had 1 million customers. Now we have 18 million customers.

Will you continue to use Microsoft's Internet Explorer for your browser?
Sure. For the time being we have an agreement with Microsoft that says we use IE, and they bundle AOL with Windows. I think it's important to be bundled with Windows, so we will continue to use IE.

It's important to be bundled on the operating system. It's so ubiquitous in the market. And if the only way to be bundled is to use IE, we'll use IE. If they change their policy, and we have additional flexibility, we'll assess it at that point.

Meanwhile, we'll continue investing in Netscape browser development. We have Netscape 5.0 coming out soon. We think it is important to have choice in the market.

It seems like Microsoft's fear about Netscape was its ability to become a platform that could make Windows unnecessary. It seems like there's a lot of infrastructure that AOL has to offer with Sun Microsystems and Netscape to control the experience.
We have no interest to be in the operating system business. We certainly will continue to innovate AOL, Netscape, and ICQ as brands. Expect people to use our services more in their daily life.