The Lauchlan angle

Something has gone wrong when a chief executive urges his customers to ease off his company's product. Something has certainly gone wrong at America Online (AOL) - the US' largest online service provider has become a casualty of the 'World Wide Wait' phenomenon.

The positive spin on AOL's current position is that it's a victim of its own success; the negative reality is that many of its seven million subscribers are unable to log on and are proving singularly unreceptive to PR blandishments from the marketing department.

AOL's problems stem from an unlimited access, flat-rate pricing scheme introduced in December, bolstered by a successful wall-to-wall ad campaign on TV. But while it was busy encouraging millions of extra subscribers to log on, AOL appears to have made few allowances for the strain this would put on an already weighed-down infrastructure.

Hence the plea from Bob Pitman, AOL chief executive, asking customers not to log on as much. Be considerate, he begged, 'just as you would be sensitive about using a public phone booth if others were waiting in line to use it'. Anyone who has ever stood in line waiting to use a payphone in New York could have told him that argument wasn't going to wash with the great American consumer. This is America, not the UK. When customers aren't happy, they don't just shrug their shoulders - they sue.

And so they have. Suits have been filed in New York and Los Angeles, the latter accusing AOL of malice and fraud for not putting in place the right hardware to handle additional traffic. State attorney generals have also been making ominous noises about investigating. That really would mean trouble.

AOL has begun a rearguard action, promising to spend $100m (u59.1m) more than it planned to install thousands of new modems and routers. It has also wisely decided to tone down its marketing - the recruitment drive adverts have continued to air despite the crisis, which is just bad marketing.

Meanwhile, the other Internet service providers (ISPs) are stepping up their campaigns to woo the AOL disaffected. The buckling Internet infrastructure needs heavy investment to improve access. Unfortunately, no-one wants to carry the cost. The ISPs are inevitably against new Internet taxes to raise revenue, arguing that they are hit by existing telecoms taxes already. The alternative? Bump up the phone bills, of course, whether customers use the Net or not.

The US Federal Communications Commission has finally recognised the problem and has begun to gather information on possible courses of regulatory action. Fierce lobbying by the ISPs is inevitable, but before they submit any proposals they should take a long look at AOL and ask one question: who's next?