MANNHEIM, GERMANY: German prosecutors have threatened America Online with charges of inciting racial hatred, a key advance in what is shaping up as a general campaign by the German government against online services providing controversial material through the Internet. Compuserve and a German Internet provider, T-Online, recently received similar warnings from German prosecutors. These latest charges reflect a general desire on the part of many governments to control the Internet, even though there is little case law on regulating the transmission of electronic information. Attempts to fence in the frontiers of cyberspace have taken place recently in France, where the manager of a "cyber cafe" was arrested after he put a suppressed tell-all book by President Francois Mitterand's physician on the Net, and in America, where the recently passed telecommunications bill prohibits the dissemination of "indecent" material. TIME's Philip Elmer-Dewitt is not optimistic: "The Internet is a flexible global phenomenon; local governments that try to set up barriers will find that it's like bailing out the ocean. However, if they do pass strong laws, and enforce them, they could close down free speech on the Net, in the sense that some people will pay the penalty. Someone could go to jail in Germany for disseminating Nazi propaganda, even if it came from America."