Jenne, AOL/Europe. Having recently been there I can tell you that few Europeans spend hours sitting in front of the PC. It is much nicer to walk around <g>. Anyway their phone rates are killing them.
Best thing for AOL/Europe is when AOL/SUN/MOT come out with wireless
modem via satellite. Hopefully europeans can pick it up cheaper that way and by-pass their local, state-ownned/subsidized/protected and cuddled phone companies,
TA
you said
The Anglo File: AOL Europe Can't Seem to Connect to a Clear Strategy
By Nick Watson
U.K. Correspondent
6/9/99 7:00 AM ET
It could have been the perfect chance for AOL (AOL:NYSE) Europe to convince
investors that its subscription-based business model would work in Europe. On the
very day Dixons Group announced it would spin off its free Internet service
provider, AOL representatives met with investors at the BancBoston Robertson
Stephens Technology and Telecoms Conference in London.
Unfortunately, AOL was long on words and short on detail, and in the end, it
contradicted itself by saying it too may well adopt a free ISP format.
On Monday, Dixons, the U.K. electronics retailer, announced -- not unexpectedly
-- that it would float a minority stake in Freeserve, its ISP subsidiary. By all
accounts, Freeserve has been an outstanding success. By scrapping subscriptions
and relying instead on advertising, e-commerce and a slice of local phone charges
for revenue, Freeserve overtook AOL as the U.K.'s largest ISP in a matter of 12
weeks.
Freeserve now has 1.5 million subscribers compared with AOL U.K.'s 600,000
subscribers. AOL Europe has about 2.6 million subscribers.
Needless to say, Freeserve's success has forced other ISPs in the U.K. to follow
suit, and a majority of ISPs in the U.K. now offer free Internet access. AOL
Europe, however, has insisted that with only 14% of Europe's households online
and signs that the telcoms may begin offering free local calls to the Internet, the
endgame is still some way off.
"One of the things we spend a lot of time thinking about is how ultimately all this will
play out," Chris Hill, vice president of corporate development at AOL Europe, told
investors at the conference.
Talk the Online Talk
Clear thinking, however, was not terribly apparent. Hill spent much of his time at the
podium explaining why AOL Europe, with its localized content and ability to offer
access to the Internet regardless of where customers are in the world, would
ultimately be able to turn back the tide of the free ISPs.
Yet during a question-and-answer session, Hill appeared to contradict himself,
saying that AOL's preference for the subscription model "doesn't mean we will
never launch a free ISP." Free service, he said, could eventually be an option for
AOL customers.
Besides this issue, AOL Europe still has much to do to convince investors that it's
on top of the game. Last month, much to the disappointment of the investment
community, AOL Europe's long-awaited response to free Internet access was to
cut its subscription rate to 9.99 pounds per month from 16.95 pounds. Hill added
that one "should stay tuned" for changes in AOL Europe's pricing.
Hill insisted that this move "is not the sum-total response" of AOL Europe to the
competitive challenges it faces from the free ISPs, but that there was much more to
come.
Walk the Online Walk
Hill did hint, although vaguely, at a number of potential ventures. He said that AOL
Europe is planning to invest in a number of ventures with portals that would give its
subscribers access to more value-added services. These investments will be
announced in the coming weeks, he said.
Other ventures included extending the AOL TV venture (currently in the U.S.) to
digital TV in Europe within a year and also providing Internet services through
next-generation mobile phones.
Ultimately, though, Hill said AOL Europe is pinning its hopes on the development of
free local calls to Internet providers in Europe, which could ruin the free ISPs. He is
not alone in this thinking. Brian McMillan, the head of Colloquium -- a subscription
ISP in the U.K. -- believes that when unlimited local calls arrive, "everyone will see
that the emperor has no clothes."
"The money from advertising and e-commerce just won't be enough for these ISPs,"
McMillan says.
Ad Money Doesn't Add Up to Much
Top 10 Advertisers on the U.K. Web for January
Advertiser Amount
(British pounds)
BT 92,000
Amazon 70,000
IBM 62,000
British Airways 49,000
Microsoft 39,000
Hewlett-Packard 33,000
QXL 33,000
United News & Media 32,000
Last Minute Network 30,000
Associated Newspapers 25,000
Source: Fletcher Research
Ironically, although free ISPs would hate to see free local calls, phone charges are
actually hindering the development of European e-commerce, an essential building
block to the economics of the Internet.
Hill said the average Internet user in Germany and the U.K. is only online for seven
hours per month and pays on average $60 per month for this luxury. By
comparison, the average user in the U.S. is online for 30 hours per month and pays
only $20 per month. As a result, Europe is not only well behind Europe in terms of
the amount of retailing done online, but it may also fall even further behind.
Are the unlimited Internet calls on which AOL Europe is pinning its hopes mere
pie-in-the-sky dreams? Maybe not. British Telecom (BTY:NYSE ADR) and
screaming.net are already offering such services for Internet access, under certain
conditions, of course. And Internet boycotts -- vigorously supported by AOL --
have been adding to this pressure.
"Last year I think most industry analysts saw free local calls in five to six years; I
think this timetable has been compressed to a couple of years," Hill says.
So, even according to AOL Europe, things are unlikely to change overnight. AOL
might consider offering investors and Internet users alike some idea of what it will
do in the meantime.
</> |
