Gates turns to feds for help with Instant Messaging

Microsoft chairman Bill Gates has turned to an unlikely ally in his battle against America Online (AOL) and its instant messaging (IM) program, AIM: The federal government. Gates has asked the Federal Communications Commission (FCC), which is reviewing AOL's merger attempt with Time Warner, to require the combined companies to open up their IM program to competitors. Microsoft and AOL got into a public spat over instant messaging in the summer of 1999, when Microsoft altered its MSN Messenger IM program to allow interaction with AOL's users. AOL reconfigured its own software to prevent this, accusing Microsoft of "hacking into the AOL namespace." For a time, the two companies were offering patches to enable and then disable the cross-IM communication. The battle ended a month later when Microsoft "opened" its MSN Messenger communication protocol in an attempt to provide instant messaging interoperability.

Flash forward a year and a half, and little has changed. AOL controls the instant messaging market due to its market position as an Internet service provider with over 26 million users. And Microsoft's open protocol has come no closer to being the standard on which all other IM applications are built. So Gates and Microsoft have petitioned the FCC, which will give final approval to the AOL/Time Warner merger, to force AOL to open up AIM. "IM's potential to become a robust platform--to the benefit of consumers and a competitive Internet services market--will be fully realized only if IM shares the features of openness and interoperability that characterize both the public telephone network and the Internet," Microsoft wrote in an FCC filing that echoed points made by Gates in phone calls to the agency. Gates called regulators at the FCC on December 14 and 15, hoping to make this issue a stumbling block for the merger.

Not coincidentally, the FCC had intended to examine the instant messaging market as part of its review of the merger, and Gates' comments have certainly added to the pressure on the agency to ensure that a proper accounting of the situation occurs; various lawmakers, including Senator Conrad Burns of Montana, have requested that the FCC "go to great lengths" to ensure that the AOL/Time Warner merger is fair to competition, including the IM market. But AOL decries any action against its AIM service. "FCC intervention in the terms of IM-related service offerings would constitute an unprecedented regulation of information services, and indeed herald the FCC's initiation of regulation of the Internet,'' AOL wrote in a filing with the FCC last week. AOL pointed out that Microsoft's IM offering was now bundled with the company's dominant Windows operating system.

But AOL has other reasons to seek to speed FCC approval. The company says that its $110 billion merger with Time Warner would suffer "substantial burden and expense" if it wasn't consummated by the end of 2000. Chief among these are the over 10,000 part-year state and local tax returns that the company would be forced to file if the deal lingers into 2001. But even though the FCC is widely seen as the last major hurdle before the merger is approved, AOL/Time Warner doesn't have a lot of time left before 2000 comes to an abrupt end. And one might suspect that Bill Gates doesn't mind playing the role of the Grinch in this particular drama

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