The story
Founding
CompuServe was initiated during 1969 as Compu-Serv Network, Inc. in Columbus, Ohio, as a subsidiary of Golden United Life Insurance.
Though Golden United founder Harry Gard Sr.'s son-in-law Jeffrey Wilkins is widely miscredited as the first president of CompuServe, its first president was actually John R. Goltz. Wilkins replaced Goltz as CEO within the first year of operation. Goltz and Wilkins were both graduate students of electrical engineering at the University of Arizona. Other early recruits from the same university included Sandy Trevor (inventor of the CompuServe CB Simulator chat system), Doug Chinnock, and Larry Shelley.
The company's objectives were twofold: to provide in-house computer processing for Golden United Life Insurance; and to develop as an independent business in the computer time-sharing industry, by renting time on its PDP-10 midrange computers during business hours, mainly to other businesses. It was divested as a separate company during 1975, trading on the NASDAQ using the symbol CMPU.
Concurrently, the company recruited executives who changed the emphasis from offering time-sharing services, for which customers wrote their own applications, to a service providing application programs. The first of these new executives was Robert Tillson, who quit Service Bureau Corporation (then a subsidiary of Control Data Corporation, but originally formed as a division of IBM) to become CompuServe's Executive Vice President of Marketing. He then recruited Charles McCall (who succeeded Jeff Wilkins as CEO, and later became CEO of the medical information company HBO & Co.), Maury Cox (who became CEO after the departure of McCall), and Robert Massey (who succeeded Cox as CEO).
In 1977, CompuServe's board changed the company's name to CompuServe Incorporated. In 1979, it began "offering a dial-up online information service to consumers". In May 1980, at which time Compuserve had fewer than 1,000 subscribers to its consumer information service, H&R Block acquired the company for $25 million and within four years had grown its subscriber base to about 110,000.
Technology
The original 1969 dial-up technology was fairly simple—the local telephone number in Cleveland, for example, was a line connected to a time-division multiplexer that connected via a leased line to a matched multiplexer in Columbus that was connected to a time-sharing host system. In the earliest buildups, each line terminated at a single machine of CompuServe's host service, so that one dialed different telephone numbers to reach different computers.
Later, the central multiplexers in Columbus were replaced with PDP-8 minicomputers, and the PDP-8s were connected to a DEC PDP-15 minicomputer that acted as switches so a telephone number was not tied to a particular destination host. Finally, in 1977, CompuServe developed its own packet switching network, implemented by DEC PDP-11 minicomputers acting as network nodes that were installed throughout the United States (and later, in other countries) and interconnected. Over time, the CompuServe network evolved into a complicated multi-tiered network incorporating Asynchronous Transfer Mode (ATM), Frame Relay (FR), Internet Protocol (IP) and X.25 technologies.
In 1981, The Times explained CompuServe's technology in one sentence:
Read the full text
CompuServe is offering a video-text-like service permitting personal computer users to retrieve software from the mainframe computer over telephone lines.
The New York Times described them as "the most international of the Big Three" and noted that "it can be reached by a local phone call in more than 700 cities".
CompuServe was also a vendor of other commercial services. One of these was the Financial Services group, which collected and consolidated financial data from myriad data feeds, including CompuStat, Disclosure, I/B/E/S as well as the price and quote feeds from the major exchanges. CompuServe developed extensive screening and reporting programs that were used by many investment banks on Wall Street.
CIS
On September 24, 1979, Radio Shack began offering the residential information service MicroNET, in which home users accessed the computers during evening hours when the CompuServe computers were otherwise idle. This was a success and CompuServe began to advertise it more widely as "MicroNET, CompuServe's Personal Computing Division". Its success prompted CompuServe to disuse the MicroNET name in favor of its own, becoming CompuServe Information Service, or CIS, on July 1, 1980. CIS's 1979 origin was approximately concurrent with that of The Source.
By the mid-1980s, CompuServe was one of the largest information and networking services companies, and it was the largest consumer information service. It operated commercial branches in more than 30 US cities, selling primarily network services to major corporations throughout the United States. Consumer accounts could be bought in most computer stores (a box with an instruction manual and a trial account login) and this service was well known to the public. By 1987, consumer business would provide 50% of CompuServe revenues.
The corporate culture was entrepreneurial, encouraging "skunkworks projects". Alexander "Sandy" Trevor secluded himself for a weekend, writing the "CB Simulator", a chat system that soon became one of CIS's most popular features. Instead of hiring employees to manage the forums, they contracted with systems operators (sysops), who received compensation based on the success of their own forum's boards, libraries, and chat areas.
Newspapers
In July 1980, working with Associated Press, CompuServe began hosting text versions of the Columbus Dispatch, The New York Times, Virginian-Pilot and Ledger Star, The Washington Post, San Francisco Examiner, San Francisco Chronicle, and Los Angeles Times were added in 1981; additional newspapers followed.
Although accessing articles in these newspapers comprised 5% of CompuServe's traffic, reading an entire newspaper using this method was impractical; the text of a $0.20 print edition newspaper would take two to six hours to download at a cost of $5 per hour (after 6 p.m.).
Selling connectivity
Another major unit of CompuServe, the CompuServe Network Services, was formed in 1982 to generate revenue by selling connectivity to the nationwide packet network CompuServe had built to support its time-sharing service. CompuServe designed and manufactured its own network processors, based on the DEC PDP-11, and developed all the software that operated on the network. Often (and erroneously) termed an X.25 network, the CompuServe network implemented a mixture of standardized and proprietary layers throughout the network.
One of the proprietary layers was termed Adaptive Routing. The Adaptive Routing system implemented two powerful features. One is that the network operated entirely in a self-discovery mode. When a new switch was added to the network by connecting it to a neighbor via a leased telephone circuit, the new switch was discovered and absorbed into the network without explicit configuration. To change the network configuration, all that was needed was to add or remove connections, and the network would automatically reconfigure. The second feature implemented by Adaptive Routing was often discussed by network engineers, but was implemented only by CNS – establishing connection paths on the basis of real-time performance measurements. As one circuit became busy, traffic was diverted to alternative paths to prevent overloading and poor performance for users.
While the CNS network was not itself based on the X.25 protocol, the network presented a standard X.25 interface to customers, providing dial-up connectivity to corporate hosts, and allowing CompuServe to form alliances with private networks Tymnet and Telenet, among others. This gave CompuServe the largest selection of local dial-up telephone connections in the world, in an era when network usage charges were expensive, but still less than long-distance charges. Other networks permitted CompuServe access to still more locations, including international locations, usually with substantial connect-time surcharges. It was common during the early 1980s to pay a $30-per-hour charge to connect to CompuServe, which at the time cost $5 to $6 per hour before factoring in the connection-time surcharges. This resulted in the company's being nicknamed CompuSpend, Compu$erve or CI$.
CNS has been the primary supplier of dial-up communications for credit-card authorizations for more than 20 years, a competence developed as a result of its long-time relationship with Visa International. At the peak of this type of business, CompuServe transmitted millions of authorization transactions each month, representing several billion dollars of consumer purchase transactions. For many businesses an always-on connection was an extravagance, and a dial-up option made better sense. This service presently remains in operation, as part of Verizon (see below). There are no other competitors remaining in this market.
The company was notable for introducing a number of online services to personal computer users. CompuServe began offering electronic mail capabilities and technical support to commercial customers in 1978 using the name InfoPlex, and was also a pioneer of the real-time chat market with its CB Simulator service introduced on February 21, 1980, as the first public, commercial multi-user chat program. Introduced in 1985, EaasySABRE, a customer-accessible extension of the Sabre travel system, made it possible for individuals to find and book airline flights and hotel rooms without the help of a travel agent. CompuServe also introduced a number of online games.
File transfers
Around 1981, CompuServe introduced its CompuServe B protocol, a file-transfer protocol, allowing users to send files to each other. This was later expanded to the better-performance B+ version, intended for downloads from CIS itself. Although the B+ protocol was not widely supported by other software, it was used by default for some time by CIS itself. The B+ protocol was later extended to include the Host-Micro Interface (HMI), a mechanism for communicating commands and transaction requests to a server application operating on the mainframes. HMI could be used by "front end" client software to present a GUI-based interface to CIS, without having to use the error-prone CLI to route commands.
CompuServe began to expand its business operations outside the United States. It began in Japan in 1986 with Fujitsu and Nissho Iwai, and developed a Japanese-language version of CompuServe named NIFTY-Serve in 1989. In 1993, CompuServe Hong Kong was initiated as a joint venture with Hutchison Telecom and was able to acquire 50,000 customers before the dial-up ISP frenzy. Between 1994 and 1995 Fujitsu and CompuServe co-developed WorldsAway, an interactive virtual environment. As of 2014 the original virtual environment that began on CompuServe in 1995, known as the Dreamscape, was still operating.
During the late 1980s, it was possible to log on to CompuServe via worldwide X.25 packet switching networks, which bridged onto CompuServe's existing US-based network. It gradually introduced its own direct dial-up access network in many countries, a more economical solution. With its network expansion, CompuServe also extended the marketing of its commercial services, opening branches in London and Munich.
CCAC
CompuServe, and its outside telecommunications attorney, Randy May, directed appeals to the Federal Communications Commission (FCC) to exempt data networks from having to pay the common carrier access charge (CCAC) that was levied by the telephone local exchange carriers (primarily the Baby Bell companies) on long-distance carriers. The primary argument was that data networking was a new industry, and the country would be served better by not exposing this important new industry to the aberrations of the voice telephone economics (the CCAC is the mechanism used to subsidize the cost of local telephone service from long-distance revenue). The FCC agreed with CompuServe's argument, and the consequence is that all dial-up networking in the United States, whether using private networks or the public internet, is much less expensive than it otherwise would have been.
Internet
CompuServe was the first online service to offer Internet connectivity, albeit with limited access, as early as 1989, when it connected its proprietary e-mail service to allow incoming and outgoing messages to be exchanged with Internet-based e-mail addresses.
During the early 1990s, CompuServe had hundreds of thousands of users visiting its thousands of moderated forums, forerunners to the discussion sites of the World Wide Web. (Like the Web, many forums were managed by independent producers who then administered the forum and recruited moderators, termed sysops.) Among these were many in which computer hardware and software companies offered customer assistance. This broadened the audience from primarily business users to the technical "geek" crowd, some of whom had earlier used Byte Magazine's Bix online service.
There were special forums, special groups, but many had "relatively large premiums" (as did "some premium data bases" with charges of "$7.50 each time you enter a search request".)
In 1992, CompuServe hosted the first known WYSIWYG e-mail content and forum posts. Fonts, colors and emoticons were encoded into 7-bit text-based messages via the third-party product NavCIS for MS-DOS and Windows 3.1, and later, Windows 95. NavCIS included features for offline work, similar to offline readers used with bulletin board systems, allowing users to connect to the service and exchange new mail and forum content in a largely automated fashion. Once the "run" was complete, the user edited their messages locally while offline. The system also allowed interactive navigation of the system to support services like the chat system. Many of these services remained text based.
CompuServe later introduced CompuServe Information Manager (CIM) to compete more directly with AOL. Unlike Navigator, CIM was adapted for online work, and used a point-and-click interface very similar to AOLs. Later versions interacted with the hosts using the HMI communications protocol. For some types of service which were not compatible with HMI, the older text-based interface could be used. WinCIM also allowed caching of forum messages, news articles and e-mail, so that reading and posting could be performed offline, without incurring hourly connection costs. Previously, this was a luxury of the NavCIS, AutoSIG and TapCIS applications for power users.
CIS users could purchase services and software from other CompuServe members using their CompuServe account, something Internet users could not do until the NSFNET lifted the prohibition on commercial Internet use in 1989.
During the early 1990s, the hourly rate decreased from more than $10 per hour to $1.95 per hour. In March 1992, it began online signups with credit card based payments and a desktop application to connect online and check emails. In April 1995, CompuServe had more than three million members, still the largest online service provider, and began its NetLauncher service, providing WWW access capability via Spry, a Mosaic browser. AOL, however, introduced a much cheaper flat-rate, unlimited-time, advertisement-funded price plan in the US to compete with CompuServe's hourly charges. In conjunction with AOL's marketing campaigns, this caused a significant loss of customers until CompuServe responded with a similar plan of its own at $24.95 per month in late 1997.
As the World Wide Web grew in popularity with the general public, company after company terminated their once-busy CompuServe customer assistance forums to offer customer assistance to a larger audience directly through their own company websites, an activity which the CompuServe forums of the time could not address because they did not yet have universal WWW access.
In 1992, CompuServe acquired Mark Cuban's company, MicroSolutions, for $6 million.
AOL's entry into the PC market in 1991 marked the beginning of the end for CIS. AOL charged $2.95 an hour versus $5.00 an hour for CompuServe. AOL used a freely available graphical user interface-based client; CompuServe's wasn't free, and it only had a subset of the system's functionality. In response, CIS decreased its hourly rates on several occasions. Subsequently, AOL switched to a monthly subscription instead of hourly rates, so for active users AOL was much less expensive. By late 1994, CompuServe was offering "unlimited use of the standard services (including news, sports, weather)... and limited electronic mail" for $8.95 per month – what The New York Times called "probably the best deal."
CIS's number of users grew, maximizing in April 1995 at 3 million worldwide. By this time AOL had more than 20 million users in the United States alone, but this was less than their maximum of 27 million, due to customers quitting for lesser-cost offerings. By 1997 the number of users quitting all online services for dial-up Internet service providers was reaching a climax.
In 1997, CompuServe began converting its forums from its proprietary Host-Micro Interface (HMI) to HTML web standards. The 1997 change discontinued text based access to the forums, but the forums were accessible both through the web as well as through CompuServe's proprietary HMI protocol. In 2004 CompuServe discontinued HMI and converted the forums to web access only. The forums remained active on CompuServe.com until the end of 2017.
Acquisitions
CompuServe made a number of acquisitions in its history, both before and after being acquired by H&R Block:
Early 1970s – Alpha Systems of Dallas, Texas, a small regional timesharing company which was also based on PDP-10 technology. It was operated as a standalone company for a brief time, but later their PDP-10 was moved to CompuServe's Columbus, Ohio, datacenter and the Dallas operation ended.
~1986 – Software House – developer of System 1022, a relational database system.
~1986 – Collier-Jackson – developer of human resource management products.
1988 – Access Technology – developer of the 20/20 spreadsheet program.
1995 – Spry, Inc. – developer of Internet in a Box, the first consumer internet suite.
From Wikipedia’s article on CompuServe, shared under CC BY-SA 4.0.4