Lessons learned

The Bell regional holding companies and GTE have reached a digital age milestone-each is offering Internet access. The carriers say they're prepared, unlike their AT&T parent, for a customer blitz (see story on page 40).

Yet concerns continue to mount about Internet traffic clogging the public switched network, and whether technological solutions will be viable in time to prevent a near-collapse of the Internet backbone.

Such worries evoke the ancient warnings that pride goes before a fall. No matter how well-prepared, carriers would do well to learn from America Online's recent service troubles and the inevitable backlash against the much-touted asymmetrical digital subscriber line technology that vendors everywhere now profess to offer.

Many of AOL's troubles can be traced to management issues. Why make software available in mass mailings and introduce flat-rate pricing if the infrastructure cannot handle the customer response? Scaling back advertising, asking users to stay on-line for shorter periods and adding customer service representatives exemplify crisis management at its worst. So angry users have taken matters into their own hands by filing class-action lawsuits and registering thousands of furious complaints.

Daniel Janal, a University of California-Berkeley professor, offered this advice from his Online Marketing Handbook: Apologize, give customers cash rebates, work out the technology issues and monitor Internet news groups, where users can post messages venting their outrage. Yes, investors read news groups.

The deeper issues, as carriers know, involve the Internet infrastructure and the business model on which the whole system is based.

Although ADSL has gotten much recent publicity, the much older high-bit-rate digital subscriber line is starting to make a comeback as the technology of choice because its symmetrical nature may be more suited to business and home office needs.

While the technology debate goes on, carriers must ask themselves whether a flat-rate pricing business model makes sense, and for how long. Service providers typically introduce high-speed services to businesses and telecommuters, who will tolerate higher prices and provide greater margins. Carriers' traditional usage-based pricing might make sense economically, but it flies in the face of the Internet's evolution as an open system benefiting the masses (see story on page 58). Only time, and busy signals, will tell.