AOL playing catch-up at high-speed

By Lisa Singhania
Associated Press

Ben Yrungaray, a 22-year-old college student in Provo, Utah, grew up using America Online to surf the Web. But when he decided to upgrade to high-speed Internet service, he turned to AT&T Broadband, which "had all the features that I needed and it was less expensive." Associated Press

"AT&T Broadband had all the features that I needed and it was less expensive," said the 22-year-old Provo, Utah, college student.

That's not what America Online wants to hear.

The online giant is counting on its high-speed Internet service to reverse declining revenues and allay fears that its business is deteriorating.

A new strategy announced in December stakes future growth on AOL Broadband, which the company says will feature offerings — including magazine articles, news video and musical performances — unavailable for free anywhere else on the Web.

Analysts are skeptical. AOL Broadband tends to be pricier and, so far, little different from such aggressive competitors as Microsoft and EarthLink.

AOL has been slow to develop the broadband service, in part because doing so hinges on the cooperation of other divisions of parent company AOL Time Warner Inc., analysts say.

"This battle is AOL's to lose," said Gerald R. Faulhaber, a professor of business and public policy at the Wharton School of Business. "They are getting into it too late. Two years ago, they could have been the king of broadband."

AOL executives declined to be interviewed for this story, but spokeswoman Anne Bentley said the company has "made significant strides on the programming side and there's more to come."

Analysts say the online service's still dysfunctional relationships with other AOL Time Warner siblings make prospects murky.

"AOL has not had a lot of cooperation from the other divisions ... and I don't think that has changed," said analyst Jonathan Gaw of technology research firm IDC Inc. "Look at Time Warner Cable. They still have RoadRunner out there, which in many ways competes with AOL, and that just shouldn't be."

RoadRunner is Time Warner Cable's in-house broadband product.

Although AOL has offered high-speed service for years, its marketing has been halfhearted.

Until recently, AOL dial-up subscribers got few pitches about broadband and there was no national ad campaign. As of last year, only 2.7 million of AOL's 26 million U.S. subscribers were high-speed customers.

AOL does have one significant asset that analysts say should not be underestimated: millions of loyal dial-up customers inclined to stick with the familiar — including Linda Kennedy.

"We're comfortable with AOL. We know how it works and it's easier for us to get what we need," said Kennedy, an executive assistant in Fremont, Calif., who chose AOL Broadband after considering competitors including AT&T. "And I think the service is a lot better than what else is out there."