Prodigy (ISP)

Prodigy Communications Corporation was a dialup service (a sort of "mega-BBS") for home computers in the United States before the advent of the Internet. Prodigy claimed it was the first consumer online service, differentiating itself from the leading service provider, CompuServe, which was used mostly by technophiles.

Early history

The earliest roots of Prodigy date back to 1980 when broadcasting giant CBS and telecommunications giant AT&T formed a joint venture named Venture One in Fair Lawn, New Jersey. Venture One conducted a market test of 100 homes in nearby Ridgewood to gauge consumer interest in a Videotex-based TV set top device that would allow consumers to shop at home and receive news, sports and weather. After concluding the market test, CBS and AT&T took the data and went their separate ways in pursuit of developing and pursuing this market.

Prodigy was founded in 1984 as Trintex, a joint venture between CBS, computer manufacturer IBM, and US retailer Sears. CBS left the venture in 1986 during a period where CBS CEO Tom Wyman was divesting of properties outside of CBS's core broadcasting business. The Prodigy service was launched regionally in 1986 in Atlanta, Hartford and San Francisco under the name Prodigy. A nationwide launch followed in 1988.

Thanks to an aggressive marketing campaign in the media, bundling with various consumer-oriented computers such as IBM's PS/1 and Packard Bell computers and Hayes Modems, a retail presence at most major retailers, and due to its basic uniqueness, the Prodigy service soon had more than a million members. Prodigy had done its homework in studying the concentration of homes with computers, building a national network of POP (points-of-presence) sites that made local access numbers available for most homes in the U.S. This was a major factor in the expansion of the service since members did not have to dial long distance to access the service. The member would only pay for the local call while Prodigy paid for the long distance call back to its national data center.

Development

Initially, Prodigy had hoped that its service would be much like today's Internet portals, offering news, weather, sports, shopping for groceries or general merchandise, banking, brokerage services, and airline reservations. The service provided many lifestyle features too: an array of popular syndicated columnists, Zagat restaurant surveys, Consumer Reports articles and test reports, games for kids and adults, in-depth original features called "Timely Topics," bulletin boards moderated by subject matter experts, and email. All of this was presented with a graphical user interface based on NAPLPS and supported by proprietary programs installed on the subscriber's PC. (The emphasis was on MS-DOS and, somewhat later, Microsoft Windows. Apple Macintosh was also supported, but the Prodigy screens were not always configured to the Mac standard, resulting in wasted space or cut-off graphics.) The initial business model was based on fixed, low monthly fees for unlimited use, with advertising and online shopping to generate huge profits (indeed, with few exceptions each "page" of Prodigy had the equivalent of a banner ad on it).

Under the guidance of editor Jim Bellows, Prodigy developed a fully-staffed 24x7 newsroom with editors, writers and graphic artists intent on building the world's first true online medium.

Some of its shopping applications were successful, but others were not, possibly because online purchases were then a novelty of which subscribers were suspicious. Prodigy retains the distinction of having launched ESPN's online presence and growing such firms as PC Flowers into some of the online world's earliest success stories. Still, marketers had yet to recognize the power of this new medium, so revenue from advertising was limited. Cash flow problems soon forced Prodigy to increase its user fees.

Since Prodigy's business model depended on rapidly growing advertising and online shopping revenue, email was developed primarily to aid in the shopping experience, not for general communication between users. However, the bulletin boards and email proved very popular--so popular that Prodigy, alarmed by increasing costs, moved to ration their use by allowing only a limited number (30) of email messages free each month and charging 25 cents for each additional email message. This policy was later recinded. But in the summer of 1993, in a similar attempt to offset usage costs, it began charging hourly rates for what had become it most popular feature, its message boards. Many regular message board users did not fully appreciate what this meant until a few weeks later, when they received stunning three-digit bills for the previous month's activity, in the place of what had been standard bills for about $20. Members began quitting the service in droves, and a downward membership slide began that the company was never fully able to halt. It later recinded the hourly rates for message boards, but the damage had been done.

Perhaps due to the conservative cultural bent of IBM and Sears, Prodigy was slow to adopt features that made its rival, AOL, so appealing -- for example, anonymous handles, online chat, and unmoderated bulletin boards. As with all services at that time, member turnover ("churn") was a major problem.

Prodigy stuck with its graphical interface, its proprietary content, and its dour policies while other services, notably AOL, embraced open standards and grew faster. In the early 1990s the explosive growth of the Internet threatened to leave Prodigy behind, despite its high ranking in consumer satisfaction and reliability surveys (unlike AOL, which was derided for its busy signals, security issues and other problems.)

Conversion to a true ISP

In 1994 Prodigy became the first of the early-generation dialup services to offer access to the World Wide Web and to offer Web page hosting to its members. Since Prodigy was not a true internet service provider, programs that needed an Internet connection, such as Internet Explorer and Quake multiplayer, could not be used with the service. Prodigy developed its own web browser, but it lagged well behind the mainstream browsers in features. Eventually the company retooled itself as a true internet service provider, making its main offering Internet access branded as Prodigy Internet and de-emphasizing its antiquated interface and its own editorial content, which were rebranded as Prodigy Classic. Prodigy Classic was discontinued in November 1999 because it was decided that for financial reasons, its aging software should not be updated for Y2K. In the end, the service had 209,000 members.

A Public Company

In 1996 Prodigy was acquired by the former founders of Boston Technology and their new firm International Wireless, with Mexican billionaire Carlos Slim Helú, a principal owner of Telmex, as a minority investor. IBM and Sears sold their interests to this group for $200 million. It was estimated that IBM and Sears had invested more than $1 billion in the service since its founding.

Prodigy continued to operate as before, while Telmex provided Internet access under the Prodigy brand in Mexico and other parts of Latin America, with some services being provided by Prodigy Communications in the United States.

Prodigy went public in 1999, trading on the NASDAQ under the symbol PRGY. Later that year, Prodigy entered a strategic partnership with SBC Communications wherein Prodigy would provide Internet services and SBC would provide sales opportunities and network, particularly DSL, facilities.

On November 6, 2001, Prodigy was bought by SBC Communications. On November 14, 2001, SBC and Yahoo! announced the strategic alliance to create the co-branded SBC Yahoo!. Some time thereafter SBC ceased to provide Prodigy accounts, and customers were encouraged to migrate to the SBC Yahoo! product line.

Telmex still offers Internet access in Latin America under the Prodigy brand, with approximately 80% marketshare in Mexico.

Criticisms

Spyware-like behavior

Prodigy was accused in late 1990 and early 1991 of spying on its users; this was one of the first online privacy scares. The evidence offered was bits and pieces of user data showing up in two files created by the software installed on subscribers' PC's: STAGE.DAT and CACHE.DAT. Prodigy contended that the data were never transmitted; in fact, their software was preallocating disk space but not zeroing it before use -- a conscious choice intended to reduce startup time on slow home computers. The unzeroed storage contained fragments of data from deleted user files. Some users claimed user data appeared even on freshly formatted disks that had Prodigy installed on them, although real evidence of this was never presented. Prodigy demonstrated to several public agencies that none of the data was ever transmitted, but rumors persisted. To quell the bad publicity, Prodigy sent users on request a floppy disk labeled "Prodigy Stage/Cache Utility Software". These contained a program to zero out the STAGE.DAT and CACHE.DAT files, eliminating the suspicious data.

Content Control

Being the forerunner in this new medium, there was little case law and Prodigy unfortunately was also the leader in litigation and censorship claims. While some claimed that Prodigy was an editorial entity such as a newspaper or radio station whose content was subject to legal statutes such as defamation, slander and the like, Prodigy argued that it was a communications entity such as a telephone company whose "content" (i.e. telephone conversations) they were not responsible for. They were simply the medium across which these communications occurred.

Claims of censorship included users of public forums who were forbidden to mention other users by name. The most infamous example of this was a coin collector's message, banned because it contained the phrase "Roosevelt dime" - there was, as it happened, a Prodigy subscriber named "Roosevelt Dime". A wildlife discussion group found that the word "beaver" was forbidden; they had to call the animal by its scientific name. Moderators on boards dedicated to computer games would delete posts based on the games' storylines rather than gameplay. Criticisms of the Prodigy service in its public forums were often deleted. Users tried to work around Prodigy's various strictures. For instance, to beat the thirty-message email limit, some users set up "undergrounds" -- shared accounts where they communicated by sending messages back to the same account. When they became popular, even typing the abbreviation "UG" (Underground Garden) could get a message automatically deleted.

Pioneering and unusual aspects

Prodigy pioneered the concept of Online Communities. A Content Department was responsible for creating and developing different Content Areas for specific topics. Each Content Areas had a Prodigy Producer who gave contracts to Prodigy subscribers to assist in running the communities in exchange for a small stipend. Each community consisted of a Website, a Chat Area with different rooms, and a Bulletin Board.

Unlike many other services, Prodigy started out with flat-rate pricing. In a reversal of the trend seen with most other services at the time, Prodigy went from flat-rate pricing to hourly rates in June 1993, causing a large exodus from the service.

Prodigy was also one of the first to offer a user-friendly GUI when competing services, such as CompuServe and GEnie, were still text-based. Prodigy used this graphical capability to deploy heavy advertising, which it hoped would bring additional revenue.

Prodigy was also forerunner in caching data at the local sites to minimize its long distance expenses.

Prodigy's legacy architecture was novel at the time and anticipated much of current web browser technology. It leveraged the power of the subscriber's PC to maintain session state, handle the user interface, and process applications formed from data and interpretative program objects which were largely pulled from the network when needed. At a time when in the state of the art, distributed objects were handled by RPC equivalents (essentially remote function calls to well known servers in which final results were returned to the caller), Prodigy pioneered the concept of actually returning interpretable, "platform independent" objects to the caller for subsequent processing. This approach anticipated such things as Java applets and Javascript. A strong argument can be made that Prodigy pioneered true distributed object-oriented client-server implementations as well as incidental innovations such as the equivalent of HTML Frames, pre-fetch, etc. Prodigy patented its implementation (US 5,347,632 et al.) and these patents are, as of this entry, among the most highly cited of all software patents.

Downfall

Prodigy was frequently hurt by poor management decisions. Those in charge failed to understand the developing medium, giving at least the impression of disdaining users' wishes, constraining usage rather than catering to it. For example, when subscribers used more connect time on email or message boards, Prodigy discouraged such usage by changing fee structures. Many subscribers quit rather than live with these constraints, especially as alternatives appeared in the form of rival providers. The Prodigy Communities were starved of resources and became insignificant against the vast background of the World Wide Web.

While the strategic partnership with SBC provided a significant infusion of cash and customers, the intended migration of SBC Internet Services customers to Prodigy took longer than expected.

Current status

In the United States

By 1994, Prodigy became a pioneer in selling "dial-up" connections to the Web, the graphical interface for the Internet, and sold hosting services for Web publishers.

In 1999 the company, now led by a cadre of ex-MCI executives with the goal of turning the brand around, became Prodigy Internet, marketing a full range of services, applications and content, including dial-up and DSL for consumers and small businesses, instant messaging, e-mail and communities.

In 2000, with subscriber growth exploding and brand attributes at an all time high, Prodigy explored a number of partnership deals including what would have been an unprecdented three-way merger between Earthlink, Mindspring and the company. Ultimately, SBC bought a 43 percent interest in the company, and Prodigy became the exclusive provider to SBC's 77 million high-speed Internet customers. More than a year later after the launch of Prodigy Broadband, SBC bought controlling interest for $465 million when Prodigy was the fourth-largest Internet service provider behind America Online, Microsoft's MSN and EarthLink. Prodigy in 2000 was reported to have 3.1 million subscribers of its own, of which 1.3 were DSL customers.

AT&T no longer actively markets Prodigy services. However, a fair number of customers still use the Prodigy services that were available at the time of the acquisition. Employees from the former Prodigy remain active in AT&T's Internet operations.

Attempts by SBC to sell the Prodigy brand became public knowledge on December 9, 2005, via CNET News: Prodigy up for Sale.

In Mexico

In Mexico, Prodigy Internet is the main ISP with an estimate of 80% of the market share, also is the leader in WiFi access (hotspots) and broadband (DSL) access. The broadband service is called Prodigy Infinitum and is available in speeds of 512 kbit/s, 1024 kbit/s, 1300 kbit/s and 2000 kbit/s. The installation and DSL modem are both free, if the service is purchased for at least 2 years. Prodigy Internet in Mexico is part of Telmex (Telefonos de México).

External links

Prodigy Internet Online - (USA)
Prodigy Internet Online - (Mexico)
Mock-up of the Prodigy login screen
Recreation of the Prodigy Mad Maze game (requries Internet Explorer 5+)

Internet service providers | Internet service providers of Mexico Online service providers | AT&T

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