Instant Messaging on the Internet: Interoperability Issues of Competition and Fair Access

Instant Messaging on the Internet: Interoperability Issues of Competition and Fair Access

Order Code RS20688
Updated March 28, 2002
CRS Report for Congress
Received through the CRS Web
Instant Messaging on the Internet:
Interoperability Issues of Competition and
Fair Access
name redacted
Analyst in Information Science and Technology Policy
Resources, Science, and Industry Division
Summary
Instant Messaging (IM) is one of the fastest growing Internet applications. The
recent debate about IM is related to the broad issues of open access rules and
competition in the high speed Internet service and cable television markets. Although
IM technology has evolved largely independent of formal regulation, a review of the
AOL-Time Warner (AOL-TW) merger brought issues of interoperability (the ability to
exchange messages between multiple IM services) among IM services under scrutiny
both in the US and Europe. Concerns about open access and accessibility for the
disabled, have been raised by Members of Congress, the Federal Trade Commission
(FTC), the Federal Communications Commission (FCC), and the European Commission
(EC). These issues highlight the growing complexity of regulating converging
technologies. This report discusses the technology behind instant messaging and
provides an overview of the issues. It will be updated as necessary.
Background
Instant messaging (IM) is one of the fastest growing free services on the Internet.
IM combines the immediacy of a telephone call with the network presence of electronic
mail (e-mail) to create an instantaneous system for exchanging messages between two
people. In its simplest form, IM applications are used for the synchronous exchange of
text messages. However, recent developments in IM technology also now allow users to
exchange files, pictures, and even voice messages. Many industry observers are optimistic
about the future of IM, suggesting that IM software could become part of Web browsers
and will soon become available for wireless devices such as cellular phones and personal
digital assistants.1
1 Barry Nance, “Instant Messaging: Good for E-Commerce?” Computerworld, 15 May 2000, p.
74; John Borland, “Instant Messaging Moves to Cell Phones,” CNet News.com, 23 February 2000,
[http://www.canada.cnet.com/news/0-1004-200-1556076.html]
Congressional Research Service ˜ The Library of Congress

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The interest in IM stems from the larger debate regarding the America Online (AOL)
-Time Warner, Inc. merger. Concerns have been raised not only about the possibility of
AOL-Time Warner being a dominant force in cable-based Internet services, but also that
it could leverage its customer base against providers of alternative high speed Internet
services such as digital subscriber lines (DSL), which runs over telephone lines. The IM
debate serves as a case study of the broad issues of open access rules and competition in
the high speed Internet service and cable television markets.2 As the Internet continues
to develop as a medium for communications and entertainment, it is possible these issues
will be raised again in the context of a related technology.
Both U.S. and European regulators expressed concern that the merger would create
a company capable of controlling a significant portion of both the distribution channels for
new media content (cable TV, Internet access, satellite broadcasts), as well as the content
itself (digital music, books, videos). The EC, FTC, and FCC all examined the IM issue,
either directly or indirectly, as part of their larger overall reviews of the AOL-Time Warner
(AOL-TW) merger.
In Europe, the EC was primarily concerned about the combined company’s ability to
shut out competitors’ access to distribution channels for the emerging market for the
d i g i t a l d e l i v e r y o f m u s i c , s p o r t s , a n d e n t e r t a i n m e n t
[http://europa.eu.int/comm/role_en.htm]. Although some observers believed there was
less potential for such monopolistic control by a combined AOL-TW in Europe than the
United States, other observers cited AOL Europe’s rapid growth as one of the leading
pan-European Internet service providers (ISPs) as an indicator of its potential to create a
“walled garden” of digital media.3 The proposed AOL-TW merger was further
complicated by a proposed 50-50 joint venture between British-based EMI Music and
Time Warner, which represent two of the five largest recording companies in the world.
In October 2000 the EC approved the merger on the condition Time Warner call off its
merger with EMI and sever its relationship with European media giants Bertelsmann AG
and Vivendi SA. The EC did not include restrictions regarding IM, deciding that AOL’s
dominance in Europe was far weaker than in the United States.4
In the United States, where AOL is the largest ISP and Time Warner is the second-
largest cable television company, there was a greater focus on infrastructure questions.
The FTC review concentrated on the implications of combining different technical
capabilities in one company, particularly on “open access” as a means to ensure
competition between rival ISPs and choice of technologies.5 In December 2000 the FTC
approved the AOL-TW merger with conditions. These conditions included requiring the
merged company to open its cable system to competing ISPs before AOL is allowed to
2 See CRS Issue Brief IB10045, Broadband Internet Access: Background and Issues, by (name r
edacted) and (name redacted) for a more comprehensive review of open access issues.
3 Edmund Andrews, “No Concessions in AOL Merger,” New York Times, 7 September 2000, C9;
Alex Klein, “Europe Watches Warily as AOL Flexes Muscles,” Washington Post, 18 September
2000, A1.
4 Edmund L. Andrews, “Europe Approves AOL-Time Warner Deal,” New York Times, 12
October 2000, [http://www.nytimes.com/2000/10/12/technology/12ONLI.html].
5 Elizabeth Wasserman, “The Other Trustbuster,” The Standard, 8 September 2000,

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offer its own high-speed cable access, prohibiting the interference with either the content
or consumer access to interactive television services provided by non-affiliated providers,
and requiring the merged company to continue to support and promote its DSL services
at a comparable level as it does its cable services.6
The FCC, which held hearings about the impact of the merger on IM, addressed the
issue directly as part of its overarching concerns regarding the development and use of
new communications technologies and preserving competition between service providers
[http://www.fcc.gov/csb/aoltw/07-27-00_enbanc/agenda.html]. In January 2001 the FCC
also approved the merger with conditions. In addition to reinforcing the FTC’s
requirement that AOL-TW open its cable systems to competitor ISPs and restricting its
ability to enter into exclusive access agreements with ATT, the FCC also restricted the
merged company from offering advanced IM services such as videoconferencing until it
either implements an industry-wide standard or enables interoperability standards between
i t s I M s y s t e m a n d t h a t o f t h r e e o t h e r c o m p e t i t o r s
[http://www.fcc.gov/Bureaus/Cable/Public_Notices/2001/fcc01011_fact.pdf].
Who Provides Instant Messaging Services and Who Uses Them?
Most IM services require users to download and install a small program on their
computers. To use an IM application, users first create a personal directory of “buddies”.
The IM software alerts the users when one or more of the user’s “buddies” is online and
available to chat via instant messaging. Users then send an invitation or a short message
to a person to initiate the discussion. IM is more expeditious than e-mail because the
message immediately appears on the person’s screen. In contrast, e-mail messages are
stored on a central server until the recipient decides to check and download the messages.
Although earlier forms of synchronous chat technology, such as the Unix “talk”
feature and Internet Relay Chat (IRC) have existed for over a decade, the current
incarnation of IM did not become widely available until 1997.7 Originally noted for its
entertainment value, IM was seen as a way for younger users, often using unusual “screen
names,”8 to communicate. However, as IM has grown in popularity and functionality,
some industry observers predict that IM will grow into a $6 billion market as it becomes
an important business tool.9 According to some estimates, 29% of US corporations
currently use IM while 42% may begin to utilize IM for business in the future.10 There are
a number of potential business uses for IM, including providing live online customer service
for shoppers, and to support communication and collaboration in a “virtual office” where
6 David Lansky and Jeremy Pelofsky, “AOL/Time Warner Wins FTC Blessing,” Reuters, 15
December 2000.
7 Patricia Fusco, “AOL: Instant Messaging Interoperability is a Non-Issue,” InternetNews, 28 June
2000, [http://www.internetnews.com/isp-news/article/0,2171,8_404471,00.html]
8 Screen names are pseudonyms used to identify a person sending or receiving instant messages.
9 Patrick Ross, “AOL Time Warner Can’t be Trusted On Access, Hill Panel Told,” New York
Times, 6 October 2000, [http://www.nytimes.com/cnet/CNET_0_4_2948607_00.html]
10 Steven Bonisteel, “Instant Messaging Increases in Workplace,” Newsbytes, 19 March
2002, [http://www.newsbytes.com/news/02/175316.html].

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members of a team may be located in different areas of the country or the world. IM also
provides a means to communicate discreetly with colleagues during meetings and
negotiations. During the September 11, 2001 terrorist attacks, many people turned to
cellphone-based text messaging and Internet-based instant messaging to get around the
congested phone networks. AOL reported a 20% jump in instant messaging volume,
handling 1.2 billion messages on September 11.11
A growing number of IM services are now available, most at no cost to the user.
Although an exact accounting of the number of people using IM applications is not
available, based on the reported number of users, some of the most commonly used IM
programs include AOL Instant Messenger (AOL IM), ICQ (“I Seek You”), Yahoo
Messenger, and MSN Messenger.12
Interoperability Issues
Until recently, IM has evolved largely unnoticed and independent of any formal
regulation. Since IM is often a free service offered to attract users to purchase other
services, such as Internet access, there has been no commercial market to regulate.
However, two qualitative changes in the IM market may change this situation. First, the
rapid increase in IM users has helped draw more competitors into the field, heightening the
vested interest in the future of IM as a service. Second, the advanced technical capabilities
associated with IM software programs such as file transfers and voice messaging suggest
that IM has the potential to evolve from the simple exchange of text messages to something
more akin to telecommunications services regulated by the FCC. Consequently
interoperability issues have arisen that could affect the future growth of IM.
Within the larger controversy over interoperability, two inter-related issues can be
identified, open access and accessibility. Open access concerns have been raised mostly
by companies who want to assure their ability to enter into certain markets for services.
Accessibility concerns have been raised mostly by advocates who wish to maintain the
Internet as a resource that is accessible to all people, regardless of their disability.
The major question being debated at this time is whether there should be
interoperability between different IM applications. At the present, there is no technical
standard to guide the development of IM applications. Unlike e-mail programs, which
conform to certain industry-led standards, each company develops its IM products as it
chooses. The result is that in order to communicate with another user, both people must
be using the same application. For example, an individual cannot use AOL IM to
communicate with another person who uses Yahoo! Messenger.
In response to a growing concern over the lack of standards, the Internet Engineering
Task Force (IETF) convened the Instant Messaging and Presence Protocol Working Group
(IMPPWG) in 1999 to define the protocols and data formats necessary to develop a widely
interoperable instant messaging system [http://www.ietf.org/overview.html]. In February
2000, the IETF issued a minimum set of requirements in a Request For Comments (RFC)
11 Alex Daniels and Brendan Barrett, “Saved by Text Messages,” Washington Techway, 1
October 2001, p.14.
12 Jill Carroll, “FCC May Open AOL Messaging Center,” Wall Street Journal, 13 September
2000, A3.

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and continued to review the various industry-proposed protocols and suggestions. The
IETF has since narrowed down a list of ten proposals to three protocols that it is actively
considering. The IETF’s review is focusing on the protocols’ ability to provide “presence
information,”(the ability to locate other users who are online) as well as the ability to
communicate using different systems. It is unclear if the interoperability protocol,
tentatively called the Common Profile for Presence and Instant Messaging (CPIM), will be
approved by the IETF.13
Open Access. The debate over IM interoperability focuses primarily on the issue of
open access and is related to the original concerns over whether a merged AOL-Time
Warner will provide access to Time Warner’s high speed cable lines to rival ISPs.
Although estimates vary depending on the measurements used, two of the most popular
IM programs, AOL IM and ICQ, are both owned by AOL. Based on the global number
of registered accounts, which may or may not actually be used in any given month, the
Wall Street Journal reports that ICQ has 73 million accounts and AOL IM has 65.5 million
accounts. The next most-popular program is Microsoft Messenger, with 18 million
accounts.14 These numbers also includes multiple accounts created by the same people.
In contrast, Media Metrix estimates that AOL IM has 21.5 million unique users
(individuals using the service during a given time period, only being counted once), ICQ
has 9.1million users, Yahoo Messenger has 10.6 million users, and Microsoft Messenger
has 10.3 million users.15
At this time, AOL IM and ICQ are not compatible with each other (ICQ users cannot
communicate with AOL IM users). However, it was widely reported that in September
2000 it was discovered that AOL had conducted research and development tests that
enabled individuals to use their ICQ username and password to log on and chat using AOL
IM. Although it was reported these tests were successful, AOL has not extended
compatibility for all users beyond this test phase.16 Since July 1999, several companies
have tried to engineer their products so they can interface with the AOL IM user database
without the permission of AOL. In its June 26, 2000 response to the FCC, AOL stated
that it has blocked these unauthorized attempts to access its user database on the grounds
of protecting the computer security and privacy of its users. AOL also said it has licensed
i t s I M t e c h n o l o g y a t n o c o s t t o o v e r a d o z e n c o m p a n i e s
[http://www.fcc.gov/csb/aoltw/resp626.txt].

Although AOL submitted a plan for interoperability to the IETF in June 2000, critics
claimed that the plan was not detailed enough and did not commit AOL to a specific
13 Jennifer DiSabatino, “Task Force Focusing on IM Interoperability Protocol,” Computerworld,
1 January 2000, p. 17.
14 Jill Carroll, “FCC May Open AOL Messaging Center,” Wall Street Journal, 13 September
2000, A3
15 Ariana Eunjung Cha, “Yahoo, MSN Challenge AOL in Instant Messaging,” Washington Post,
16 November 2000, p. E9.
16 Ben Hammer, “AOL Links Instant Messenger Services,” The Standard, 26 September 2000,
[http://www.thestandard.com/article/display/0,1151,18853,00.html]; Jim Hu, “AOL ‘Test’ Gives
ICQ Members a New Home: AIM,” CNET News.com, 26 September 2000,
[http://news.cnet.com/news/0-1005-200-2871202.html].

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timetable for cooperating with other companies.17 AOL has stated that it supports
developing an interoperable IM system but it must address issues of security, privacy, and
user authentication. In testimony to the FCC in July 2000, President of AOL Interactive
Services Barry Schuler stated that it would take over a year to fully develop the technology
and perform quality testing.18 In response, some instant messaging competitors refute
Schuler’s claim, noting their previous successes in temporarily making their products
compatible with AOL IM before being blocked by AOL as evidence of their position.19
Several companies critical of AOL’s approach to IM joined together to form an
organization called FreeIM. FreeIM is a strong advocate for the development of open
standards for IM and directs most of its criticism at AOL.
Accessibility. The accessibility issue has been raised primarily by advocates for the
deaf, such as the National Association of the Deaf (NAD) and TDI (formerly known as
Telecommunications for the Deaf, Inc.). According to these organizations, IM is a critical
m e t h o d f o r d e a f - t o - d e a f a n d d e a f - t o - h e a r i n g c o m m u n i c a t i o n
[http://www.nad.policy.net/proactive/newsroom/release.vtml?id=18761]. They suggest it
represents a necessary alternative for communication in the face of the growth of voice
telephony over the Internet. They believe IM is important so that the deaf are not
marginalized in terms of Internet accessibility. Advocates for the deaf also argue that IM
is a much easier and quicker means to communicate compared to using text telephones
(TTYs). They advocate that IM technology should be developed under the principles of
open standards and interoperability.
Options for Congress
To date there have been no hearings or bills introduced in the 107th Congress
regarding instant messaging. However, the outcome of efforts to achieve IM
interoperability could impact other Internet-related issues such as the merger of media
companies, broadband competition, and the digital divide. IM technology is rapidly
evolving and could be a new platform for providing videoconferencing, interactive gaming,
and/or e-business services. Consequently, Congress may decide to revisit concerns about
IM interoperability and accessability in the larger context of these other issues.
17 “America Online Backs World Message Standards,” New York Times, 16 June 2000, C22.
18 Barry Schuler, “En banc Hearing on America Online, Inc. and Time Warner, Inc., Applications
for Transfer of Control, CS Docket No. 00-30,” 27, July 2000, p. 168-169.
19 Laurie J. Flynn, “AOL’s Rivals Want to See Open Instant Messaging,” New York Times, 31
July 2000, C9.

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