To: freeus who wrote (16367 ) 5/11/1999 8:09:00 AM From: Glenn D. Rudolph Respond to of 41369
AOL gathers arms as slashes UK Internet prices By Kirstin Ridley LONDON, May 10 (Reuters) - AOL Europe, the European unit of the world's leading Internet services provider, said on Monday it was slashing British Internet prices by 45 percent amid cut-throat competition from a flood of free, on-line services. AOL Europe, a joint venture between U.S. online services giant America Online Inc <AOL.N> and German media giant Bertelsmann AG <BTGGga.F>, is offering a new British package for unlimited Internet use for 9.99 pounds per month from June 1. In a move to take a firmer hold of the British market and offer new Internet users a hand through cyberspace, AOL Europe said the new deal would position it for a future that would see 90 percent of those offering subscription free Web access fail. "This is the only sustainable model to achieve long-term growth in the UK and throughout Europe," said Andreas Schmidt, president and chief executive officer, AOL Europe. "AOL is unique in having the global scale, experience and expertise to successfully implement this formula here, as it has in markets around the world." The new deal includes access to chat rooms in cyberspace, respected, sought-after retailers for the electronic shopper, seven-day-a-week free customer service, comprehensive parental controls and access to a global community of more than 17 million members. AOL, which receives 80 to 85 percent of its revenues from subscription services and which says it holds around 35 percent of the British market, is banking on the new deal dramatically boosting usage and accelerating the growth of electronic commerce revenues. And with the British Internet market poised for exponential growth, AOL says it will be happy to maintain its 35 to 40 percent market share. In the face of around 70 subscription-free services such as British retailer Dixons Group Plc's <DXNS.L> Freeserve, subscription based Internet service companies have struggled to keep hold of customers. But Schmidt noted that free services were mainly funded by a share of the local telecommunications call charges that users make and premium-rate helpline charges -- a practice that is being eyed by telecoms watchdog Oftel. "This business model is going to collapse and the big question mark is whether they (subscription-free Internet dial services) have built up substantial advertising and e-commerce revenues to sustain that business," Schmidt told Reuters. "My prediction is very simple. There will be some who will be able to manage, but most won't. We are going to see a shake-out in the next six to 18 months across the free services and I see a maximum of two or three surviving." AOL Europe, meanwhile, has around one million customers in Britain and says it is offering an unmatched interactive experience at an affordable price, supported by multiple revenue streams -- a strategy pioneered by America Online.