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Technology Stocks : America On-Line (AOL) -- Ignore unavailable to you. Want to Upgrade?

To: Vendit™ who wrote (31696)	9/28/1999 8:30:00 AM
From: Mazman	Read Replies (1) \| Respond to of 41369

Subscribing to the NYT is free. Just need to register. Until then.. America Online Unit to Reduce Subscription Costs in Britain By ANDREW ROSS SORKIN / NYT LONDON -- Hoping to stem its market slide in Britain, America Online said Monday that it would lower the monthly cost of subscribing to its service here. AOL will charge users one British penny a minute, or 1.65 cents, in addition to the monthly subscription fee of £9.99, or $16.45, making it more competitive with Freeserve P.L.C., the British market leader, which requires only the cost of a local phone call to connect to the Internet. The move surprised some analysts because AOL U.K. had introduced Netscape Online, a subscription-free service similar to Freeserve, with considerable fanfare only a month ago. AOL U.K. is a unit of AOL Europe, which in turn is a joint venture between America Online and the German media conglomerate Bertelsmann. Unlike the United States, where Internet access over a telephone line is relatively inexpensive, access in Britain and most of Continental Europe can be prohibitive. Users pay by the minute for local phone calls, in addition to the charge levied by the Internet access provider. In Britain, the cost can be high as 6.6 cents a minute during peak hours, and range downward to 1.65 cents a minute at night on weekends. As a result, Internet services like Freeserve and its imitators have emerged, luring customers by not charging a monthly subscription fee for Internet access. The subscription-free services make money by sharing a percentage of the revenue generated by the cost of the user's phone call with the telephone company. AOL U.K. users spend an average of 17 minutes a day online while users of America Online in the United States spend an hour a day online. Now, AOL hopes to increase its share of business by keeping its metered charges on a par with those of its free-subscription competitors. "If you make it cheap enough to use it all the time, people will use it all the time," said Robert W. Pittman, president of America Online in a telephone interview. Some analysts said the new pricing system could cannibalize subscribers from America Online's new sister brand, Netscape Online. Bruce Kasrel of Forrester Research said, "It undermines Netscape Online, but they are willing to put Netscape Online on the chopping block if it means all of the subscription-free services are on the block with it." AOL has traditionally relied on the monthly subscription model, which tends to provide significantly higher profit margins than the free-subscription model. As well as getting a part of local phone charges, the free services depend on revenue from advertising and electronic commerce. Pittman maintained that America Online would not encroach on Netscape Online's customers because, he said, the two brands appealed to different segments of the market. Netscape Online, he said, is for the budget user, while AOL's proprietary content appeals to families. Some analysts speculated that the move to what AOL U.K. labeled "off-peak all the time" would result in a surge of new subscribers that might overwhelm the company's network, much like what happened in the United States in late in 1996 and early in '97, when the parent America Online introduced flat-rate pricing. But Pittman said, "I hope we've learned from our mistakes." As phone companies like British Telecommunications move toward flat-rate pricing for local calls, the war between free-subscription Internet services and subscription-based services will blur, said Noah Yasskin, an analyst at Jupiter Communications here. Freeserve announced today that it would offer 10 free hours of Internet access a month during off-peak hours if users placed a certain total of calls with its partner, Energis P.L.C. Freeserve is expected to announce its first-quarter financial results on Tuesday, and analysts expect its growth to have slowed as the result of increased competition.