Detente Is for Dummies

By Josh Quittner

As a stockholder and employee of the fabulous company known as AOL Time Warner, parent company of TIME, I wanted to see this corporation strike an accord with mighty Microsoft last week. But as a citizen of the global village and all-around guy of the people, I was thrilled when the deal dropped dead. The company stooge in me drooled at the prospect of the two biggest players in Computerville divvying up the market. AOL would get premium distribution and placement in the October release of Windows XP, helping it add gazillions of new users to its rolls. In exchange, Microsoft would not have to worry about AOL's pressing assorted antitrust actions against it.

It was easy to see how that kind of detente could lay the footing for future joint projects. If AOL kept the legal heat off, maybe Microsoft would integrate AOL's Instant Messenger into the upcoming rethink of Windows and abandon its own anemic instant-messaging program. That might finally persuade AOL to kill off its Netscape browser, which everyone knows hasn't really worked for a few generations. Then AOL could officially adopt Microsoft's Internet Explorer. See how easy it is to play ball together?

Perhaps, if things went really well, Microsoft might decide to pull the plug on MSN, its rival online service. The trade-off: Microsoft could provide all the software that people use on AOL, everything from its Passport program for storing credit-card info to its Media Player, which--let's just speculate here--could be the only one licensed to play Warner Bros. movies and Warner Music on demand.

The Big Deal ends up being simple: AOL TW provides the content, from The Sopranos and Madonna on demand to TIME magazine. And Microsoft provides the transactional software--an AOL link built right into the operating system. The companies work together to steer eyeballs. Then they split the billions of dollars of take.

The problem with this Wall Street dream scenario is that it's a nightmare for regular folks like you and me. We want AOL and Microsoft to compete--brutally, aggressively and without surcease. Why? Because it's great for all of us that Microsoft is trying to improve MSN, lowering its monthly fees as soon as AOL raises its own. Competition will keep prices in check and improve both services.

Likewise, it's critical to us all that AOL keep the legal pressure on Microsoft. Redmond is ruthless. Anyone who thinks that what Microsoft did to Netscape won't happen again hasn't been paying attention. Microsoft's Messenger will play a critical role in a suite of personalized consumer services called HailStorm that people will want to use in Windows XP. That's bad news for AOL, which will continue its fight. And good news for you and me.

Quibbles for Quittner? E-mail him at jquit@well.com