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

To: Jorge who wrote (4404)	2/5/1999 2:13:00 AM
From: Joe E.	Respond to of 41369

Re "Free" service in England.... The article says: "There is the standard monthly fee to a service provider — AOL, for example, charging between £4.95 ($8) and £16.95 ($27), depending on usage. Then, on top, there is the cost of the local telephone call to connect to the Internet service provider (ISP). There are no free local connections here; the cost of dialling into an ISP, at a local call rate, varies from around 6p (10 cents) a minute during the day, to 60p ($1) an hour at weekends. For anyone spending even 10 hours a month online, the cost is easily double what an American would pay. " And then it says: "Sir Stanley Kalms, the Dixons chairman, who has never been known previously to give away a thing, has calculated that despite pricing Freeserve at nothing, there is plenty of money to be made. For a start, he has hooked his company into a deal with the telephone companies which allows him to share in the revenue generated by the local connecting call. The precise split of this revenue is currently the subject of an inquiry by Oftel, the British telecoms regulator. " So, what split with the phone company is needed to make back the $8 to $27 per month that AOL is charging?? US users are using 48 minutes per day, which is 1400 minutes per month. Say the local charge is 3 cents per minute on average (who knows?). This is $42 per month to the phone company. AOL would need maybe half of this to break even. Probably 20% might be available, or $8 per month (just a guess). I wonder if it costs AOL that much to provide the service? Based upon the analysis above, the AOL model may need to be altered for Euroland. Given the values assigned to portals in the stock market right now, a free model would probably be viable, provided the advertising dollars come through as hoped.

To: Jorge who wrote (4404)	2/5/1999 2:36:00 AM
From: Phil Jacobson	Respond to of 41369

There is already a US ISP offering free service with on-screen ads that can't be eliminated from their browser. It's called NetZero. You can download the software and access for free; the ads pay for it. Funded with VC money for now, it's of course an extremely risky model for the US where there aren't any local access charges to divvy up. Service is downloadable from netzero.com I think AOL may move to this model eventually because the Internet seems to be moving eventually toward a straight broadcast model. The buggaboo is there is some incremental access and bandwidth expense for every end-user, unlike with TV where a single feed can hit a million people as easily as 500, and the only difference being quality of show and time of broadcast. For the free internet model it will be hard to make up the incremental cost via advertising, then try to get profits with more advertising and value-add services. But I think it will get there someday. Phil

To: Jorge who wrote (4404)	2/5/1999 6:05:00 AM
From: Vendit™	Respond to of 41369

Jorge you and I are on the same page here regarding free isp service. If AOL did that ...........I can't think of too many ISP providers that will be left standing. AOL and maybe 1 or 2 others in the US. That would cause a windfall for AOL. With AOL owning Netscape..........it seems as though most eyes are going to flow through either AOL or MSFT in another month of so anyway.

To: Jorge who wrote (4404)	2/5/1999 6:37:00 AM
From: Vendit™	Read Replies (1) \| Respond to of 41369

Adding one other thought to free ISP service. I can envision AOL giving away it's present ISP service but still charging for the broadband high speed service they will surely offer this year, to people that want the faster connections. So they can have their cake and eat it too.

To: Jorge who wrote (4404)	2/5/1999 9:16:00 AM
From: Steve Robinett	Respond to of 41369

Jorge, Re: free AOL The last time I figured it out (about 6 months ago), it cost AOL about $17.36/customer/month to provide internet service. That's why they had to bump prices to $21.95/mo. The AOL business model is still to let the subscriber fees pay the bills and let other income (advertising, partnering, etc) provide the margins. Other income in the most recent quarter accounted for a little over 18% of total revenues, up from the previous 16.5% but still nowhere near enough to provide free service. If AOL actually went to free service, the stock would tank worse than it ever did after the flat rate move a couple of years ago. Best, --Steve