JORDAN COAKLEY WITH DAD: Oh-oh, what's happening now?
STEPHEN COAKLEY, America Online Subscriber: Busy. Should we try again?
JORDAN COAKLEY: Yeah.
CHARLAYNE HUNTER-GAULT: Five year old Jordan Coakley wanted to send an e-mail message to her grandfather but like millions of other America Online subscribers, she was having trouble getting through because AOL has been besieged with thousands of new subscribers who are jamming the phone lines.
JORDAN COAKLEY: Hopefully, it'll do it this time.
CHARLAYNE HUNTER-GAULT: The Coakleys spend about ten hours a month online at home, and Jordan's Dad, Stephen, spends another fifty hours or so online at the office. Coakley's company, Horizon Consulting, has a contract to market foreclosed homes for the Department of Housing and Urban Development. He uses America Online to distribute information about those homes.
STEPHEN COAKLEY: There's a couple of different frustrations with America Online. One of them is you're on and you're working, and you get kicked oft. That happens a lot. The other one is, of course, when the system is not available at all.
CHARLAYNE HUNTER-GAULT: Getting online -- that is, dialing into cyberspace, is as common as making a phone call for many Americans -- and companies like AOL act much like the phone company, providing the connection into cyberspace. Eighteen million households are online, nearly half of them AOL subscribers. AOL's appeal lies in its easy-to-use format which provides access to news, travel, sports, and electronic mail known as e-mail.
AOL COMPUTERIZED VOICE: Welcome, you've got mail.
CHARLAYNE HUNTER-GAULT: Gary Arlen is a communications consultant who has been tracking the online industry for seventeen years.
GARY ARLEN, Online Analyst: We're crossing over what some people say a critical mass -- about 20 percent of Americans are now--American households--are now using Internet and online services, and that's an important number because it's the kind of thing that begins to encourage more advertising, encourage more and new kinds of content for this business.
CHARLAYNE HUNTER-GAULT: That's good news and bad news for AOL Chief Executive Stephen Case.
STEPHEN CASE, America Online CEO: What's really remarkable about this is the fact that people are really now relying on services like AOL. When it's not available for a couple of hours, or they can't get on in a minute or two when they're trying to connect at night, they're extremely frustrated because they've learned to depend on it. It's really become a part of everyday life.
CHARLAYNE HUNTER-GAULT: To get online, a computer needs a modem which connects it to a telephone line and an Internet access program. AOL is by far the largest of about 3,000 such programs. The first step in dialing in is usually accomplished with a click of a mouse. AOL vice president David Gang takes it from there:
DAVID GANG, America Online Vice President: Your modem calls another modem of ours that's in your local area, so if you're in Phoenix, Arizona and you dial a number, it calls another Phoenix, Arizona number and actually connects to a modem that's hooked up to our network in Phoenix.
CHARLAYNE HUNTER-GAULT: Then AOL in Phoenix connects to AOL's control center in Reston, Virginia.
DAVID GANG: When it gets to Reston, Virginia, it checks on one of our several thousand computers that you are a valid AOL member, and we talk back and forth with your computer, to make sure you have all the right graphics on your machine and then give you access to all of AOL at that point in time.
CHARLAYNE HUNTER-GAULT: Failure to get access happens when there aren't enough modems or enough phone lines to handle the number of people dialing in.
DAVID GANG: You can look at these as pipes, and the pipes are a certain size, so if you could actually have a pipe in your backyard, and you want to shove so much dirt in it, there's almost only so much dirt that can go in that pipe that's got a 2 inch diameter to it, and that's essentially the same thing that happens with data. Only so much data can flow through these network lines whether they're AOL's lines or they're out in the phone company's lines or the Internet lines, only so much data can get through that pipe at the same time.
CHARLAYNE HUNTER-GAULT: AOL has been plagued with access problems and a series of technical glitches in recent months--a 19-hour shutdown last August--failures in the so-called chat rooms where members talk to each other, and in the e-mail system in January.
LOCAL NEWS ANCHOR: (CHANNEL 4 NEWS CLIP) There are more problems tonight for America Online. Customers across the country were unable to log on--
CHARLAYNE HUNTER-GAULT: And AOL went offline--as in shut down--for several hours earlier this month. The source of a problem stems from a marketing plan which succeeded beyond AOL's wildest dreams--or to its critics promised more than it could deliver. Last December AOL offered its members an irresistible deal--all the time you want for just $19.95 a month. Just like an all you can eat buffet, AOL customers lined up for a feast.
STEPHEN COAKLEY: I'm one of those users who always had one eye on the screen and one eye on the watch to make sure I didn't run my bill up, you know, ridiculously high, so I thought it was fabulous. But I was sort of wary as to knowing that everybody else was going to think it was fabulous, too.
CHARLAYNE HUNTER-GAULT: And so they did. AOL subscriptions rose 40 percent in one month, and the average amount of time spent online doubled.
STEPHEN CASE: We expected people to use more of the service. We thought on average people would use about 50 percent more time than they used to, and in fact, it was more like 100 percent.
GARY ARLEN: What customers quickly found is that the unlimited usage gave them the opportunity to just leave the machine on for hours at a time, to keep it on just because they're afraid of not being able to get in again, and that led to this overload situation that really has brought down the system in the past couple of months.
CHARLAYNE HUNTER-GAULT: We decided to find out what AOL customers think. We went online and into a AOL chat room where one person typed this message to us: "AOL is trying to pour a gallon of water into a quart container"-- and added-- "I, for one, plan on packing my bags when my free time is up." But others weren't dissatisfied--like this person who typed in "I love AOL, I have no problems at all." Still, analyst Arlen thinks consumers shouldn't assume they can get online any time and all the time.
GARY ARLEN: I think that's a little bit greedy, and I suspect some people expect that to be part of the package, and I don't know that that's part of the guarantee or part of the contract you have. I like to think the US Postal Service will usually deliver my mail in a day or two, but that's an expectation which we've all learned you sometimes can rely on and sometimes you can't."
CHARLAYNE HUNTER-GAULT: But attorneys general in 37 states did think AOL had a commitment to providing access and some threatened lawsuits. Last month, AOL negotiated a settlement which offered a one-month credit to any customer or refunds up to $40 for those who spent less than fifteen hours online each month. For Stephen Coakley, who uses in excess of fifteen hours, that means no refund.
STEPHEN COAKLEY: I was very disappointed with the settlement. The settlement really rewards people that didn't get on, even if they never tried to get on, they're entitled to a refund as I understand it. People like me who have to get on, I made sure I got on, but I might have had to get on at 2 o'clock in the morning as opposed to 2 o'clock in the afternoon.
CHARLAYNE HUNTER-GAULT: Also, as part of the settlement, AOL promised not to solicit any new members, including not mailing disks offering free time, which was what had lured millions to AOL in the first place. Case acknowledged critics' complaints about AOL management.
STEPHEN CASE: Well, members are frustrated, there's no question about it, that's why that's our number one focus is really trying to do everything we can. In retrospect, we should have planned better for this than we did. We underestimated the demand, and our members are paying the price for that.
CHARLAYNE HUNTER-GAULT: To handle increased demand the company has begun a $350 million upgrade. It is constructing a new data center which will house even more sophisticated computers. AOL is now running ads showing a reassuring Steve Case promising thousands of new modems to allow more people to be online at one time, and four hundred new customer service representatives, and relief by April.
AOL SPOKESPERSON (on phone): All right, I see your problem.
CHARLAYNE HUNTER-GAULT: All part of an effort to keep disgruntled members from packing their bags. (busy signal)
CHARLAYNE HUNTER-GAULT: CompuServe--number two in the online business--ran this ad playing on AOL is difficulties. But switching Internet providers is no minor matter, especially for a small business like Coakley's Horizon Consulting.
STEPHEN COAKLEY: Switching is a big inconvenience itself. I mean, our e-mail address is on our letterhead, our business cards. We have given it to all our clients. Yes, we could switch, and perhaps we should switch, but that in itself if going to be an inconvenience and will have some monetary costs.
CHARLAYNE HUNTER-GAULT: Meanwhile, despite troubles at home, AOL is expanding abroad, providing access in Europe and Japan.
STEPHEN COAKLEY: So we'll try to get on again.
CHARLAYNE HUNTER-GAULT: But Americans like the Coakleys are likely to hear busy signals for at least a couple of months. Steve Case says if they'll just be patient, he's confident that by late spring he'll have the problems licked.