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AOL to Roll Out New Net Service

Features target users of broadband. But lack of a cable deal is seen as an obstacle to turnaround.

March 24, 2003|Edmund Sanders | Times Staff Writer

DULLES, Va. — Hoping to jump-start its sluggish growth, America Online next week will offer its coveted high-speed Internet customers a new look, new features and -- for some -- a new, lower price.

The AOL Time Warner Inc. unit also is promising some updated e-mail and phone message retrieval features for its massive base of dial-up customers, which has slipped a bit lately.

The rollout, backed by a $35-million marketing campaign, is meant to show Wall Street that the faltering Internet company is serious about delivering on promises made in a turnaround plan unveiled in December.

But some analysts were quick to note that major elements of the strategy -- particularly a stalled effort to sign deals with major cable operators so they would provide an AOL option -- haven't materialized.

"Securing the deals with the cable companies is key," said Mark Kersey, senior analyst at Sterling, Va.-based Current Analysis Inc., a research firm. "The new strategy doesn't seem to have met with tremendous success yet."

At a preview of the innovations last week, America Online officials predicted that subscriber levels would rise in coming months.

"We're just getting started," said Lisa Hook, who heads America Online's broadband services. "We think we've put together the most compelling broadband experience out there."

The new service, to be launched March 31, will include a redesigned home page targeted at high-speed users. Still photos will be replaced by streaming video, and popular broadband features, such as music downloading and games, will get more prominent display.

Other new broadband features include anti-virus protection and enhanced parental controls; exclusive content from sister publications People and In Style, whose current free Web sites will cease next month; and no-cost access to CNN's QuickCast, which delivers hourly news updates.

For more than a year, America Online has been trying to figure out how to leverage its position as the nation's largest dial-up Internet service provider, with 26 million U.S. customers, into the growing broadband market, which is dominated by cable and telephone companies. Last quarter's small drop in dial-up customers, the company's first, has made the transition more critical.

"There is a lot of pressure and a heightened sense of urgency," said James Bankoff, executive vice president of programming at America Online.

The push includes a temporary price break for some existing customers. For the rest of the year, America Online said it will match a recent offer by Microsoft Corp.-owned rival MSN by cutting to $9.95 the current $14.95 rate charged to customers who subscribe to AOL though they have Internet access through a cable or telephone provider.

America Online began to focus on the "bring-your-own-access" service in December. That's when it abandoned a previous effort to compete with cable operators by trying to offer a rival AOL broadband service for about $55 a month. Dial-up service currently costs $23.90.

To succeed, America Online will have to convince new and existing customers to pay for its content, such as chat rooms and instant messaging, even after they've doled out as much as $50 a month to a cable provider for access.

Partnering with cable operators would make the job easier. MSN has announced a deal with Charter Communications and is negotiating with Cox Communications. AOL, however, hasn't established such alliances, even with its sister company, Time Warner Cable.

"As long as business is good, cable operators don't see the need to start sharing the wealth," said James Penhune, broadband director at Newton Centre, Mass.-based Strategy Analytics. "They are particularly wary of a company like AOL because it has such a strong brand and might dominate the customer relationship."

America Online has about 650,000 subscribers who pay $55 a month for the full broadband access package and another 2 million who purchase broadband access from another company and pay extra for the online company's bring-your-own-access plan.

Meanwhile, America Online is rolling out new services for its traditional dial-up plan, including e-mail called AOL Communicator that allows users to better sort mail and block spam.

And later this week, the company will launch a premium service -- at $5.95 a month -- that combines e-mail and telephone voicemail, allowing users to retrieve e-mail messages over the telephone and voicemail messages via the Internet.

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