Here's an article from PC week.
September 3, 1997 6:00 PM ET
AOL: Nine million reasons to
crash?
AOL thinks it'll hit the 10 million member mark by year's end. Will the
Net crack America Offline jokes, or will the newbies get their revenge?
By Maria Seminerio, ZDNN
As America Online Inc.'s membership swells, will its
network burst?
That's the big question, as the company said Tuesday it
had signed up its 9 millionth member and was on track to
add a million more by year's end. AOL officials are upbeat,
but some analysts wonder why.
While user complaints have largely quieted down since the
brouhaha early this year, when AOL's move to flat-rate
pricing inadvertently ushered in widespread access
delays, some analysts said that's because the truly
frustrated users have long since quit the service, leaving
behind a more complacent bunch.
"They're not where they should be, by a long shot," said
Rochelle Theophano, an analyst at Datapro Information
Services Group, in Delran, N.J. "It still takes me a half hour
to get on in the evenings. But the fact is that people have
learned to accept it."
The service "still attracts a lot of novice users" who may
simply believe that lengthy access delays are part of life in
the online world, Theophano said.
"I don't think AOL should be building up the subscriber
base until they really fix the problems," she added, saying
the next subscriber push could potentially bring new
access delays.
But other observers said AOL's earlier difficulties aren't
surprising. In fact, given explosive growth of consumer
Internet and online service usage during the past two
years, and AOL's status as by far the largest of all its
competitors, the company's woes actually could have
been much worse, said Rob Enderle, an analyst at Giga
Information Group, in Santa Clara, Calif.
"The phone system only works as well as it does now
because it really doesn't change in size or at least not
nearly as fast as the Internet does," Enderle said. "With
each new thing that's added to the mix, such as streaming
video and new high-speed modems, it stresses the
network in a way that it was not originally designed to
handle."
The individual AOL user's experience differs dramatically
depending on his or her physical location and the time of
day the service is accessed, Enderle said. What's more,
complex technological changes have complicated the
problem of finding ways to speed access, he said. He
added that it may be unrealistic to expect instant,
glitch-free access from a technology that's still only a few
years old.
"I think we're probably five to 10 years away from the point
where bad service [on commercial online services] is
more the exception than the rule," Enderle said.
Meanwhile, AOL officials promise that expanding the
company's network "is still our No. 1 priority," according to
a statement by Bob Pittman, CEO of the company's AOL
Networks unit.
Since the quarter ended June 30, AOL added a net total of
400,000 users without throwing its network out of whack,
company officials said. With the completion several weeks
ago of a $350 million network build-out that added 150,000
new modems, officials maintain AOL is on track to
comfortably accommodate a subscriber base of 11 million
by year's end--a million more than they hope to attract in
that time frame.
"AOL remains totally focused on our commitment to work
around the clock to make connecting to AOL as
convenient as possible," Pittman said in a statement on
the membership landmark.
In spite of the challenges it faces, the company's
9-cent-per-share, or $10.9 million, operating profit in its
most recent quarterly results show that it's on the right
track, some analysts said. However, AOL officials took
some heat for their accounting practices, and were forced
to reverse the $2.6 million profit they had reported for the
companys third quarter, instead posting a $4.7 million loss
for that quarter.
The change came because the Securities and Exchange
Commission advised the company to spread out a $7
million payment from its marketing partner, Tel-Save
Holdings Inc., over a 40-month period instead of counting it
all at once.
During the fourth quarter company officials floated, and
then revoked, plans to sell member phone numbers to
telemarketers. |
