Copyright 2002 Globe Newspaper Company The Boston
Globe
December 9, 2002, Monday ,THIRD EDITION
SECTION: BUSINESS; Pg. C1
LENGTH: 759 words
HEADLINE:
TECHNOLOGY & INNOVATION; Material from Globe wire services was
used in this report.; AOL IN HIGH-STAKES MOVE PITCHES $15 SERVICE TO
BROADBAND SUBSCRIBERS
BYLINE: By Peter J.
Howe, Globe Staff
BODY: Internet
service giant America Online has long argued that the reason it has attracted 25
million US subscribers is because of its compelling content and services, not
just a reliable nationwide dial-up network for getting e-mail and sending
instant messages.
Now AOL is about to expose that boast
to a high-stakes test in the marketplace, as it rolls out a bid to get
broadband subscribers of other Net providers to agree to shell out an
extra $15 a month for access to AOL communications, information, and shopping
services, as well as some special features like music and video from AOL's Time
Warner counterparts.
Cable modems and
digital subscriber line systems are eating away at the once steady growth in
AOL's core dial-up franchise. So AOL Time Warner last week unveiled its strategy
to clamber onto a broadband train that is picking up steam and
threatening to leave behind the company that first popularized the Net for the
US market.
The growing broadband threat to
subscriber counts comes as AOL also warned last week that its advertising and
e-commerce revenues could plunge by 40 to 50 percent next year.
At the same time, rival Web giants are forming broadband
alliances of their own that will offer many of the features AOL is touting,
including MSN with Verizon Communications, and Qwest and Yahoo with SBC
Communications.
Besides boosting efforts to resell
broadband AOL through providers such as Covad and Comcast, AOL is also
trying to keep some of the revenues when its current $24-a-month dial-up
customers migrate to $40 and $50 cable broadband and DSL packages,
through a $14.95 package of AOL features and services.
"Would it be better if we did some of this earlier? Yes," AOL chairman
Stephen M. Case told reporters after a meeting with analysts in New York. "But
we are where we are, and we are going to move forward."
Besides having an AOL e-mail address and instant messaging, and access
to its "walled garden" of media content and shopping, broadband
subscribers to the $15 monthly package would next year be offered some special
services.
They would include music and video clips from
Time Warner music and entertainment divisions, online access to CNN TV
broadcasts that are now sold separately for $5 a month, easier systems to share
digital photographs and home video with other users, and access to premium
versions of the McAfee computer virus scanning software to protect users' home
PCs.
While more details of what the $15 package could
include will come out over the next several weeks, the immediate question many
analysts had was how many subscribers already paying $50 a month for
broadband Net access would find AOL's offerings worth paying another 30
percent premium, especially in a weak economy.
Charles
Hoffman, chief executive of Covad Communications, which has signed a deal to
begin providing wholesale DSL access for AOL in Boston and other US markets this
winter, said he thinks AOL's shift toward having more of its subscribers use
outsourced broadband connections instead of AOL-managed dial-up
connections "makes perfect sense."
But reacting to the
$15 broadband services package, Hoffman said: "I personally think that
their price may be a little high, but I guess the market will tell us. . . . The
better the content, the more people adopt broadband."
Jeff Chester of the Center for Digital Democracy, a Washington group
that opposes big media consolidations, said he believes AOL's policy is
ironically being driven by the lack of "open access"
requirements for cable modem networks that Time Warner strenuously lobbied
against becoming conditions of the $165 billion AOL Time Warner merger two years
ago.
Because AOL is having such a hard time getting
access to cable systems as an Internet service provider, Chester said, it is
forced to cast about for ways to keep at least some revenues coming in when its
customers defect to cable broadband, which accounts for about two-thirds
of all new broadband growth.
"They have to re
structure how they do business if they are going to survive, given the policy
choices they have helped create," Chester said.
Jonathan Miller, who was picked as the AOL division's chief executive
in August, said: "AOL is a business in transition. We don't pretend to have all
the answers."
And AOL vice chairman Ted Leonsis put it
even more plaintively: "We are a humbled company. We want our members to love us
and need us once again."
