Terra, sea and air

Luís Ángel Fernández Hermana - @luisangelfh
3 April, 2018
Editorial: 190
Fecha de publicación original: 23 noviembre, 1999

All the bed bugs are in the blanket

Terra Networks’ speculative explosion sent shock waves through the Internet as powerful as those on the stock markets of Madrid and New York. So much has been said over the last few days about it that I don’t think its worth adding anything else about Telefonica’s feat of “financial engineering”. However, there are two things that deserve a mention. The first is the way telephone operators are trying to structure the Internet in Spain in general and, consequently, in Latin American countries as well. The other, of a more specific kind, is about the way politicians have dealt with the Internet phenomenon. Terra’s nucleus is the Spanish search engine OLE. Developed in Catalonia and more specifically within the ambit of the Catalan government We still don’t know all the details of the bizarre story of how Telefonica ended up in control of OLE and it became the key factor in the Terra operation. But, there must be more than one person in the offices of certain politicians (and financiers) pulling their hair out every time they take a look at the latest stock market figures.

As our friend Vicent Partal points out, we are witnessing a concerted effort on the part of telecommunications companies’ to verticalise the Internet: Telefónica, Retevisión, Jazztel, Unidos and all the rest. The business strategy is simple but effective. The operator is at the helm. Underneath them lie Internet access providers (in just a year they have swept the market gobbling up the most important ones: Servicom, Redetb, CTV, Jet, etc.). Then come the search engines as a spearhead for the portal: OLE, Excite, Alehop/Iddeo, etc. And at the base of the pyramid you find electronic commerce modules based, according to this strategy, on “content”. This content, it goes without saying, belongs to them: they each have a newsroom that produces the content that EVERYONE will use.

In each case, of course, the hidden agenda is to create a closed model in which digital life is possible without users slipping away through a hyperlink, just in case they discover that there is, in fact, life beyond their fortified digital walls. The backbone of this set-up lies not on the Internet but in the business of telecommunications. The Net is simply a useful place for capturing interesting clients. To paraphrase a well-known car ad: young and well-trained enough to spend on telecommunications. There is this population converging on the Internet on the one hand, and the ability of these companies to manage a large volume of clients on the other. So, the magic word is traffic and the rest doesn’t matter at all.

Will this model be able to hold up? Well, for the moment the only thing that is clear is that it requires a lot of investment, that the time for beginning to harvest the profits is still a long way off — well into the first decade of the next century — and, in short, while they are certainly not to be ignored given their financial backing, they will have to learn to co-exist with other visions of the Net. Over the last couple of years portals in the USA have been undergoing a notable descent in traffic confronted as they are with a gradual, but constant, rise in other ways of doing business and generating content which these big digital doorways haven’t been able to take on yet. The possibility of their grinding to a halt if they run out of the steam that drove them onto the market should not be discounted. As we have often said before, Yahoo, despite being the site with the most traffic on the Internet, only represents little over 1% of the total. And the 16 most important search engines on the Net “see” just 16% of the Net (see the editorial “Shadows on the Net”). This is leaving too many people and too much content out. Which makes the perspectives for this costly verticalisation of the Spanish Internet (and, to a certain extent, the Latin America one too –we shouldn’t forget that Telefónica’s aim is to sprinkle Terra all over that continent too) a very interesting process.

As far as the second point I mentioned at the start is concerned, we all know that the backbone of a substantial part of what Terra has to offer is the search engine OLE. In 1995, Pep Vallés, thought out the idea of a Spanish search engine and took it to the Fundació Catalana per a la Recerca (Catalan Research Foundation – FCR) an organisation dependent on the Generalitat de Catalunya – the autonomous Catalan government , which at that time had created Cinet, an Internet service and access provider. And that is where OLE started. The FCR, presided over by Maciá Alavedra, the Generalitat’s Councillor for Economics at the time, managed the high speed network for research and the Catalonian Center for Supercomputation(CESCA), amongst other things, which caused a certain amount of friction then as far as Cinet was concerned because this company had a relative advantage over some of its incipient competitors.

Nevertheless, everything went swimmingly for OLE. The search engine quickly became the leading player in its sector and traffic reached hundreds of thousands, millions, of accesses a month. However, the Internet was still not seen by politicians, financial wizards and, even less so by telecommunications operators –Telefónica was the only one at the time — as something worth getting their teeth into. And that is why what suddenly happened, happened. Someone high up in the Generalitat realised that the Catalan government had a company called OLE under its wing. The Spanish ring to that word must have grated on the purist ears of language fundamentalists. Without any warning, a battle of inexplicable proportions, but with obvious political undertones, was unleashed and finally reached the Catalan Parliament. All the political parties concerned demanded an explanation for this linguistic transgression.

In the crossfire that followed high ranking politicians came up with a solution worthy of King Solomon himself: OLE should leave Cinet. Pep Vallés found himself suddenly on the other side of the street, in control of his company just as they had agreed if anything of this kind should happen. In addition, he had problems registering the name of the search engine, because the Spanish authority in charge of distributing dominions denied them to generic names, such as OLE. So Valles turned the name into the initials of Ordenamiento de Links Especializados. Pep speeded up OLE’s take off, possibly increasing its debt to his main supplier Telefonica, in order to pay for a favourable balance in user traffic. At the same time, he searched for partners to back his business. Some financial institutions and companies who now spend millions in projects of uncertain future, denied him the necessary investment to turn the business’ figures into black.

When Telefonica decided it was time to try its hand at the Internet, it found the way smoothed for keeping one of its most popular services: a little Yahoo in Spanish. It just opened its jaws and swallowed it. At the start, it was not its only option for creating a “big portal”. But after dilly dallying with other things a bit, quite disastrously on occasions, and trying out various alternative and contradictory strategies, Terra Networks finally emerged elegantly draped on the shoulders of OLE. Someone, somewhere, must be hammering their teeth out to celebrate their prophetic vision of the Internet.

Translation: Bridget King