Let’s talk about this commercial: The one dude comes to the other dude’s house to see if he’s ready to go to the game, only to reveal that he can’t go to the game himself. Why did you go to his house? This commerical is built on a logical fallacy.
The day AOL opened up the floodgates to the internet
Real internet users have long had deep suspicion of America Online, because of what it represented. It wasn’t the “real” internet—rather than forcing you to use something like Trumpet Winsock to manage your connection, or relying on your terminal skills to log in, you were given a friendly interface, and they called the shots. Given the technically savvy culture that berthed the internet, it was an easy target.
Decades later, our major social networks would look a lot like AOL, but our ISPs would not. And a lot of the reason for that comes down to a pivotal decision AOL made on December 1, 1996. That was the day it offered flat-fee unlimited access to its service for the first time.
Previously, the company offered different tiers, with the most popular being 20 hours a month, and a cost of $3 for every extra hour.
Announced the month prior, AOL both revealed that people could stay online for as long as they wanted after paying a flat $19.99 per month, but also that they that it would upgrade its access technology so its users could use a real web browser, rather than the built-in web browser that the service offered users. As Chicago Tribune columnist James Coates noted at the time, the change also added Windows 95 support to the service, which let the company “transform itself into a full-blown 32-bit Internet service provider at a flat, untimed $20-per-month toll.” (The horror of having to use software designed for Windows 3.1 to surf the web in Windows 95! The horror!)
But this move was a pendulum that swung both ways. For months after AOL made its move, trying to get access to the company’s network was near impossible—busy lines were a constant presence. Some people would try to get around the issue by buying a separate phone line and keeping the line as occupied as possible, so they wouldn’t have to dial back in. Dialing back in was torture. There was a vast digital sea to access—if you could get the initial handshake to happen.
It probably did not help that AOL distributed so many disks to users throughout the mid-1990s. (monkerino/Flickr)
Less appreciated at the time was how significant a change this was to AOL’s business model. In one fell swoop, the largest online service provider in the world was opening up to the full internet and moving its business model away from the carrot-and-stick setup of most online services up to that time.
Before that moment, online services like AOL, along with its earlier forebears like CompuServe and Prodigy, had pricing models that were based on how much you used, and they actually became less expensive with time, not more. The companies, notably, inherited a pricing strategy used by early bulletin boards and digital access platforms such as Dow Jones’ online information service, which charged for content by the hour on top of a monthly fee. This was not exactly a friendly model for consumers, and put a barrier up for the kind of addictive access we rely on today.
There were other bottlenecks as well, of course. Modems were slow on both ends of the equation—2400 and 9600-baud modems were common in the mid-1990s, and speeds were artificially limited by the quality of the connections on the other side of the line. You could have a 28.8 kilobit modem, but if the best your online provider could do was 9600 baud, you were kind of stuck.
Perhaps the biggest bottleneck to always-on access, however, was a business one. Early internet providers simply did not know if it made sense to give us more internet access—or if the business model would make sense if they weren’t charging us hourly for the right to get online. And they had infrastructure concerns, too: If you offered everyone unlimited internet, you better have enough infrastructure to handle all of those calls.
In the 2016 book How the Internet Became Commercial: Innovation, Privatization, and the Birth of a New Network, author Shane Greenstein explains how the pricing of internet access was a major challenge, and it was not immediately clear who would have the winning argument for the internet era. Here’s how Greenstein explained the two philosophical camps in ISP-land:
Two broad viewpoints emerged. One viewpoint paid close attention to user complaints about monitoring. Users remarked that surfing the World Wide Web was hypnotic. Users found it challenging to monitor time online. In addition, monitoring time online was nearly impossible with multiple users within one household. The ISPs with sympathy for these user complaints argued that unlimited usage for a fixed monthly price would be a feasible solution. A premium would cover the extra costs of the unlimited usage, though it was an open question how large that premium needed to be. These plans were commonly referred to as flat rate or unlimited plans.
An opposite viewpoint contrasted with the first one. Specifically, user complaints were transitory, and new users had to be “trained” to monitor their own time online. Supporters of this view pointed to cellular telephones and bulletin boards as examples. Cellular telephony was also beginning to grow, and pricing per minute had not deterred users. One up-and-coming bulletin board firm, AOL, had seemed to grow with such usage pricing as well. The ISPs that held to this view expressed confidence that usage prices would prevail, and they called for exploration of new combinations that might better suit surfing behavior by nontechnical users.
This led to something of an awkward state of affairs, where it was not totally clear how much of the golden goose the gatekeepers would be willing to give away. The disruptor that changed everything, somewhat ironically, was AT&T.
