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New York Times, August 3, 1998




DIGITAL COMMERCE The Internet, whose reason for being lies in open standards, is snagging on free-market appetites.

When does the term "commercial Internet" become an oxymoron? Perhaps it is when powerful corporations use their market strength to impose technical standards- intended to further their own interests and improve their bottom lines- at the expense of universal access to on-line goods and services.

The browser war between Microsoft and the Netscape Communications Corporation already threatens a truly global marketplace that is fully accessible with any browser on any computer platform. And this threat is growing with the continuing push toward unilateral standards that will dictate how consumers will one day interact, for example, with on-line video programming or World Wide Web pages.

In some cases, this trend merely reflects companies' attempts to differentiate their products- an axiom of capitalism- in the chaotic Internet market. But in other cases, it stems from an unrestrained appetite to control the flow of electronic commerce.

Such appetites ignore that the Internet exists in the first place because its technical protocols are open standards, freely available for use by everyone. Standards were the reason for its rapid adoption by the commercial world: the network itself became exponentially more valuable as its popularity avalanched and more companies and users tumbled to the benefits of being on line.

The Internet's ultimate seduction was that no matter what kind of computer one used, its standardized protocols would smooth out the rough spots and give the user as uniform and predictable an on-line experience as possible.

But the World Wide Web browser war that erupted in 1996, when Microsoft launched the market equivalent of a thermonuclear attack on Netscape's Navigator, brought that fairy tale to an abrupt end.

Almost overnight, notices started appearing on various Web sites, declaring that the sites had been "optimized" for one browser or the other: "Best viewed with Internet Explorer," or "Navigator required to display this page."

Such practices annoyed users, who until then could view virtually everything that was on the Web no matter what computer or browser they were using, and infuriated Web pioneers. They saw browser battles as turf wars, the first step toward Balkanization of the Internet- a step that, if you believed the power of the network to be collective by nature, would ultimately defeat the purpose.

More recently came the so-called portal, a thinly veiled advertising strategy that purports to draw WEb users into the wonderful world of Disney, say, or Netscape or Yahoo, and keep them there.

But of course, the trend for companies to establish their proprietary identities atop the open Internet protocols did not stop with software.

Take, for example, the "optimized content" initiative sponsored by Intel. So blatant it is almost endearing, the initiative encourages Web developers to "optimize" Web sites so they look noticeably better running on a Pentium II-based computer. This mean, conversely, that they look noticeably worse if you happen not to own a Pentium II- which is the precise situation that Intel hopes to remedy.

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Of course, none of these companies can really be expected to do anything but mess around with the open standards of the Internet. They are just following the laws of the free-market jungle.

But an industry analyst notes that standards are also used as a club by market leaders, thus stifling innovation.

William Gurley, an analyst and venture capitalist with Hummer Winblad Venture Partners in San Francisco, took on the issue of standards in a recent article, saying that they actually run counter to the interests of small, innovative companies.

"Open is a euphemism for commodity," Mr. Gurley wrote. "In commodity markets, people differentiate with production or distribution prowess and not with innovation." And the companies with production and distribution prowess are generally the market leaders.

So, he says, although everyone believes that "open" is really good for innovation- especially in the Internet economy- actually "open" is the most reliable way to preserve the status quo.

The Internet is today's hottest commodity, and an industry announcement last week serves as a model for Mr. Gurley's point.

The new Advanced Television Enhancement Forum, a coalition of media and technology giants spearheaded by Intel, said it had defined a modification to the standard Internet language, HTML, that will govern the digital distribution, via the Internet, of television programs with data added.

And of course, the specification also includes new computerized products for consumers to buy, devices that are designed to display the hybrid data.

The group-whose members include CNN, Disney, Microsoft, NBC, Sony and Warner Brothers- said that it intended to submit its new rules to a variety of standards bodies, including W3C, the World Wide Web Consortium, but that it would not wait for the group's approval before promoting the standard to the industry.

Mr. Gurley says it will be impossible for any start-up not to support a standard from such a powerful series of market leaders. If he is right, the Advanced TV Forum has, then, already trumped any competing technical innovations that may be in the pipeline. However, it also sloughs off vast numbers of existing Internet users who may never have the proper equipment.

Why would these entertainment and media companies make such a huge investment in a tiny fraction of the Internet market- which is already a fraction of their existing markets for movies and music- in a genre where there continues to be no compelling interactive applications, or income?

If differentiation is indeed the only way to succeed in business, then it is clear that the Internet as it was designed- global, two-way and largely accessible by anyone- is going the way of all flesh.

Yet the question remains: Is there some point at which differentiation kills the goose that laid the golden egg?



Created 8/9/98.

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