Online giant crashes with a global thud Outage: A routine upgrade knocks America Online out of the loop.


America Online Inc. had egg on its face yesterday, as the world's leading online service saw its worldwide system crash for at least 14 hours after a routine software upgrade went awry.

The outage began about 4 a.m., a time Dulles, Va.-based AOL chose to install new software during scheduled maintenance because relatively few of its 6.2 million subscribers are online. But it lasted throughout the day and into the evening.

"If it isn't fixed by [last] night, there's going to be hell to pay over there," said Mark Mooradian, senior analyst at the New York-based Internet consulting firm Jupiter Communications. "That's when the real money comes in."

AOL offers a mix of electronic mail, chat rooms and Internet access as well as a wide range of other features such as electronic newspapers, reference materials and games. It is marketed mostly to consumers rather than businesses, which is why usage is heaviest in the evening and on weekends, Mooradian said.

The consultant said the outage is probably the biggest in the online industry's history, if only because AOL's subscriber base is thought to account for half of all U.S. households that are online. Indeed, a spokesman for CompuServe Inc., AOL's biggest rival, said his firm has never seen anything like it.

"We've never really had a global outage of this magnitude," CompuServe's Jeff Shafer said.

Customers will get a day's free service to make up for the inconvenience, and e-mail sent to AOL users from outside the system was being stored and would be delivered as soon as possible after the system is running again, the company said.

America Online said it had confirmed that a technical problem in the installation of new software caused the system to go down.

"Every possible resource is being brought to bear to restore the service," AOL Chairman Steve Case said. "We regret any inconvenience this may have caused our customers and we will work to ensure that the problem does not reoccur."

AOL stock moved lower as word spread of the outage, but recovered later in the day after the company explained the problem. It closed up 62.5 cents at $34.875. The company is scheduled today to announce its much-anticipated fourth-quarter earnings.

"From my perspective as an analyst, I want to know how it happened," said T. Rowe Price Associates Inc. technology analyst Lise Buyer. She said she was less concerned once she saw the company's explanation, which suggested the outage stemmed from a one-time problem rather than any systemic problem AOL might be having serving a customer base that has expanded sixfold in two years.

"The power company cuts off my power once in a while and that's no big deal," she said. "Should they have had some sort of backup? Yes. But companies experience internal problems all the time when they are changing computer systems."

The crash comes at a delicate time for AOL. The company recently upgraded its software and revamped its pricing structure, moves analysts construed as efforts to meet growing competition from firms that offer direct access to the Internet without the proprietary content that distinguished AOL.

But Mooradian said he thought it unlikely that the outage will drive consumers away from AOL.

"AOL is good at following up on these little disasters," with written explanations and offers of short stints of free service to compensate for the problems, he said. "You would be pretty hard-pressed not to find an Internet service provider that hasn't had similar problems. There are compelling reasons why people sign up for AOL. There are functions on AOL you can't get with plain Internet access."

One local AOL customer said the outage inconvenienced him slightly, but he said losing access to his occasional e-mail wasn't "of great moment."

"I have an ample supply of stationery, ink and stamps," said John Bainbridge, a Glyndon writer who is working on a book. "It's not a bad idea to get a quick kick in the tail once in a while from electronic gremlins."

Pub Date: 8/08/96

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