Sign on the X.com

National | E-money emerges online, lawyers target Microsoft, and AOL grows as opponents vie for its turf

Issue: "Breaking the term limit," Sept. 16, 2000

Moving money online
Digital money is here in old-fashioned dollars and sense. The X.com website has a service called Paypal that lets users send cash to one another through e-mail using a computer or cell phone. Here's an instance where X means "sign on the X," not "X-rated." Paypal works like Western Union in that it moves money electronically from point to point. The company moves money from your account into the recipient's balance. Then Paypal makes interest on the money between transactions. Today PayPal boasts over three million accounts. It's a huge hit on the auction scene; go to eBay and you'll see PayPal logos everywhere. It relieves buyers of the hassle and time lag of mailing a check and lets them pay for their purchases via credit card. With PayPal, people can also pay personal debts or send money to kids in college. For years people have tried to figure out new ways to move money online. They have tried all sorts of alternate currencies, without success. The leading financial instrument on the Net right now is a normal credit or debit card. Services like this (and e-mail itself) have the effect of privatizing the Postal Service since it takes normal communications out of the mailbox. PayPal is still in infancy. It started in May 1999 and only launched a fraud protection program in August. But it still poses a serious challenge to using checks. The one drawback is that getting money out of the system takes 3-4 days for an electronic funds transfer. You also can't pay the mortgage payment or the light bill this way. Yet PayPal could become a big deal fast. Piling on Microsoft
Call it adding insult to injury: Microsoft faces another big lawsuit, this time from consumers instead of the Justice Department. A San Francisco judge certified a class action lawsuit against the software giant that could cost it billions of dollars. At issue: the prices that Microsoft charges for software. This California case, which combines dozens of similar cases filed in the Golden State, is the second to reach class action status. Microsoft still plans to fight a Michigan judge's ruling on the other case. Microsoft has faced a whopping 137 consumer lawsuits nationwide, but none had been allowed to proceed. California is obviously an important market for Microsoft, since it is so large and such a high-tech magnet. If a federal district court's brutal antitrust ruling stands (WORLD, June 17), this suit could be painful for the boys in Redmond. A trial is expected in 2002; by then the world will know whether there's a real chance the company will split into Baby Bills. In another case, a federal judge ordered Microsoft to pay $1 million in punitive damages to Connecticut-based Bristol Technology in a dispute over a license to the Windows NT operating system. U.S. District Court Judge Janet C. Hall claimed the company engaged in deceptive conduct with reckless and wanton indifference. Bristol makes software that allows programs written for Windows to be run under competing operating systems. The two companies had a deal from 1994 to 1997 and Bristol sued when they couldn't agree on a new deal. Meanwhile, Microsoft is moving ahead with its own wares. Microsoft Office 2000 didn't sell as well as expected, so a souped-up new version is coming next year. The first beta includes a new look and feel plus a voice-recognition interface. The latter lets people dictate with a microphone instead of typing. In a typical example of corporate synergy, it will also include easy access to MSN's e-mail and chat services. High-tech power for low-tech people
Just a few years ago, a lot of people thought America Online was heading for a crash. Critics called the service clunky and glitchy, but the company became huge by offering a path to the Internet that looked easier to use than anything else. AOL made billions by offering high-tech power to low-tech people. Today AOL is bigger than ever, absorbing everything in its path, from Netscape to the Time Warner empire. One of its latest acquisitions does the e-thing with telephones. Quack.com lets people call special phone numbers to get stocks, sports scores, and other information. It sounds strange at first, but AOL gets access to people who don't even have a computer. Meanwhile, a player in the phone industry is going after AOL's turf. Nokia is coming out with a phone that lets people hold chat sessions off the Internet. It comes with a mode that lets people swap messages back and forth using nicknames. Messages, which can be three times longer than the usual text messages on cell phones, can be sent to one person or a group. This gizmo may not conquer the world, but more services like this could come down the road. Microsoft is also re-aiming its guns at AOL's mass-market service turf. Its MSN has long lagged behind and is now preparing a new specialized browser that looks a lot more like the AOL software, taking up the single-program-for-anything model. MSN Explorer 2, which doesn't require an extra MSN subscription, has a streamlined look and lets people do e-mail, Web surfing, and chat from one window on the desktop. It may work for those who want to graduate from AOL to less expensive Internet service.

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