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Online services: Rough road


The past 12 months wreaked major havoc on proprietary online services and Internet service providers.

Microsoft and its MSN online service reshaped the market landscape when it changed course midstream and decided to become a content provider on the Internet instead of a closed, proprietary service. Its relaunch of Microsoft Network with a $19.95 monthly charge for unlimited access also had wide-reaching influence.

That was the beginning of the melding of online services and bare-bones access providers, which had long-undercut online services with "all-you-can-eat" flat-rate pricing.

Prodigy, which slipped into last place, conceded the race to the online giants, redefining itself as an ISP rather than a full-scale service with original content. CompuServe dropped out of the consumer race altogether and decided to target the small-business market. AOL, which was initially the most resistant to the idea of leaping to the Web, had by the end of the year linked its proprietary network so seamlessly with the Internet that some users can't discern the difference.

After being the only online service left charging by the hour, AOL announced in October that it too would adopt the $19.95 monthly rate, completing the transformation of content-rich online services to ISPs with some bells and whistles.

Now, ISPs are left to ponder this question: Can they stay competitive and make any money at $19.95? Netcom, which started the flat-price trend, answered this by announcing this month that it would do away with the all-you-can-eat pricing model. Next year will tell if others are forced to follow suit.