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AOL Europe slashes prices
By Bloomberg News
Special to CNET News.com
May 10, 1999, 9:25 a.m. PT
URL: news.com
LONDON--AOL Europe will cut its flat-fee charge by more than 40 percent in the United Kingdom, the first step in a broader new pricing and portal strategy it plans to start this autumn, as it takes on popular providers of free Internet access.
AOL Europe, a venture between America Online and Germany's Bertelsmann, said AOL U.K. will cut its fee to 9.99 pounds ($16.25) a month, from 16.95 pounds ($27.63), from June 1.
The move comes as AOL tries to counter the success of free Internet service providers in the United Kingdom. It took only three months for a free Internet access service by Dixons Group, Britain's largest electronics and appliances retailer, to steal the No. 1 title from AOL. Freeserve has gained 1.3 million users, twice the number of AOL users, in just seven months of running.
"We want to turn the meter off so that people stay online longer," said Andreas Schmidt, AOL Europe's CEO, in an interview. However, AOL would not go as far as providing free Internet access. "Free is not a sustainable business model," Schmidt said.
AOL plans on introducing within six months a flat-fee package for both subscription and phone charges, initially in the United Kingdom and later in other European countries. It also will start country-based Web portal sites, with content supplied by about 300 partners such as the Economist magazine and Deutsche Bank.
Freeserve has become the United Kingdom's third-most-visited portal site. AOL is trying to counter that success by starting portal sites, or gateways to other Internet sites, first in the United Kingdom and Germany, using technology that runs Netscape's Netcenter portal site and by providing specialized news and entertainment content.
To that end, AOL said it will market in the United Kingdom eBay, the top online auction company, as part of a worldwide agreement for which eBay paid $75 million. It also will advertise Verio, the world's largest domain-based Web hosting company.
AOL is not among the top-five portal sites in the United Kingdom, Germany, and France, the three biggest European Internet markets, where Yahoo leads. AOL Europe has 2.8 million users.
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