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SCHNOOK POWER

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America Online wasn't even a concept when cartoon villain Boris Badenov, of Rocky and Bullwinkle fame, uttered his famous words, “Never underestimate the power of a schnook.” However, service providers better take the little fella's advice and start thinking of AOL as a formidable schnook. Not enough eyebrows were raised last week when AOL announced its plans to provide residential VoIP service with the help of Level 3. If Vonage, starting with a customer base of zero, a technology no one understood, a delivery model it can't really control and a broadband penetration rate below 50% can steal 650,000 VoIP customers from the RBOCs, then imagine what AOL can do starting with a customer base of some 30 million, an instant messaging technology that everyone under the age of 80 understands, a following and brand so strong that even broadband couldn't kill it and the corporate parentage of Time Warner. The new, new generation of service provider has arrived, and unlike the neutered Boris and femme fatale Natasha, this generation will spawn. If AOL is even mildly successful, ISPs of all sizes will have to get in the VoIP game. To a new generation of customer, a service provider is a service provider is a service provider. And once the schnooks start stealing market share, neither flying squirrel nor talking moose will be able to save them.

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