[ih] AOL in perspective

[David Sitman]

Daniele asked me to try to distribute this to the list because his attempt
appears to have been unsuccessful.

David

-----Original Message-----
From: Daniele Bovio [mailto:Bovio at aol.com]
Sent: Wednesday, August 20, 2025 3:17 PM
To: internet-history at elists.isoc.org
Subject: [ih] AOL in perspective

A couple of comments about AOL:

I was hired by AOL in 1995 to build and manage the network operations for
Europe, in order to allow the AOL-Bertelesmann joint venture to launch and
operate AOL in UK, Germany and France. The first question I was asked by
Suk S. Soo, ANS director, during my interview was: how do you make money on
the Internet? Coming from the academic world as former Technical Director
of the European Academic Research Network (EARN) and member of the EAT
(EBONE Action Team) the group which designed and implemented the first
pan-European Internet Backbone, you may imagine my answer was less than
adequate, as for the first time I was confronted with the concept of a
"commercial" Internet.
As I quickly learned the AOL business model was to sell content/media to
the residential market via a different mean than TV by allowing the
households PCs to connect via the telephone network. The problem was that
in 1995 there was no ISP in Europe yet able/interested to offer internet
access to the residential market and so we had to build everything from
scratch, i.e. a dial-up access network and transatlantic WAN circuits
connecting to the US AOL data centers and, via ANS, to the US Internet.
So, indeed, the main target of AOL was not to be an ISP, but becoming one
was an essential component of its business plan, and therefore, given its
popularity, AOL became quickly one of the largest ISPs in the US and in
Europe.

That the main target of AOL was not to be a pure ISP in the long run was
clearly apparent when in 1998 AOL acquired CompuServe via a 3-parties
agreement with WorldCom: AOL acquired the CompuServe subscribers and sold
to WorldCom ANS and the entire CompuServe Network Services department.

Network being a fundamental pillar of its business however AOL kept
in-house the management of all the network infrastructure in the US and
Europe, so still acting as an ISP to its users, but the cost was huge,
particularly for
Europe: in 1998 AOL spent $37M for transatlantic circuits and was
projecting an expenditure of $58M by Y2K. When in 1998 it became possible
to file for and get an International Telecom Operator license, following
the crumbling of the European Telecom monopolies and the first private
transatlantic cables were built (Gemini, Atlantic Crossing) I proposed to
the AOL management to file for a license so to be able to buy IRU
(Indefeasible Right of Use) capacity on the Gemini cable. The answer was:
Nope! AOL is a content provider, not a telecom operator, find another way
to reduce the cost.

As a matter of fact that AOL decision turned out to be beneficial to the
entire European ISPs club, as I managed to figure out how to buy IRU
capacity at wholesale prices by inventing the Capitalized Lease concept,
i.e. coaxing telecom operators to lease IRUs capacity to AOL via 10-years
pre-paid lease agreements, thus removing the need for AOL to become a Telco
Operator, and reported about it to the RIPE meetings in 1999 and 2000,
allowing several ISPs to take advantage of the concept ;-). If you are
interested you can find one of my presentations about transatlantic
capacity in the RIPE archives:
https://ripe36.ripe.net/presentations/cables2k/sld001.html

So in conclusion IMHO, although its mission was not to be a pure ISP, AOL
turned out to be one, and provided a fundamental push for the development
of the Internet in Europe.

Daniele Bovio