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The Honolulu Advertiser
Posted on: Tuesday, March 25, 2003

AOL moves to increase broadband users

By Edmund Sanders
Los Angeles Times

DULLES, Va. — Hoping to jump-start its sluggish growth, America Online next week will offer its coveted high-speed Internet customers a new look, new features and — for some — a new, lower price.

The AOL Time Warner Inc. unit also is promising some updated e-mail and phone-message retrieval features for its massive base of dial-up customers, which has slipped a bit lately.

The roll-out, backed by a $35 million marketing campaign, is meant to show Wall Street that the faltering Internet company is serious about delivering on promises made in a turnaround plan unveiled in December.

But some analysts were quick to note that major elements of the strategy — particularly a stalled effort to sign deals with major cable operators to provide an AOL option — haven't materialized.

"Securing the deals with the cable companies is key," said Mark Kersey, senior analyst at research firm Current Analysis Inc. "The new strategy doesn't seem to have met with tremendous success yet."

At a preview of the innovations last week, America Online officials predicted that subscriber levels would rise in coming months.

"We're just getting started," said Lisa Hook, who heads America Online broadband services. "We think we've put together the most compelling broadband experience out there."

The new service, to be launched Monday, will include a redesigned home page. Still photos will be replaced by streaming video, and popular features, such as music downloading and games, will get more prominent display.

Other new broadband features include antivirus protection and enhanced parental controls; exclusive content from sister publications People and In Style, whose free Web sites will cease next month; and no-cost access to CNN's QuickCast, which delivers hourly news updates.

For more than a year, America Online has been trying to figure out how to leverage its position as the nation's largest dial-up Internet service provider, with 26 million U.S. customers, into the growing broadband market, which is dominated by cable and telephone companies. Last quarter's small drop in dial-up customers, the company's first, has made the transition more critical.

"There is a lot of pressure and a heightened sense of urgency," said James Bankoff, executive vice president of programming at America Online.

The push includes a temporary price break for some customers. For the rest of the year, America Online said it will match an offer by rival MSN by cutting to $9.95 the $14.95 rate charged to customers who subscribe to AOL but have Internet access through a cable or telephone provider.

AOL began to focus on the "bring-your-own-access" service in December. That's when it abandoned a previous effort to compete with cable operators by trying to offer a rival AOL broadband service.

To succeed, America Online will have to persuade customers to pay for its content even after they've doled out as much as $50 a month to a cable provider for access.

Partnering with cable operators could make the job easier. MSN has announced a deal with Charter Communications and is negotiating with Cox Communications. AOL, however, hasn't established such alliances, even with its sister company, Time Warner Cable.