The new service is expected to cost $9.95 per month for unlimited access,
a big break on the $23.90 monthly tag that comes with AOL's current dial-up
service, which has seen its subscriber numbers fall. The new plan would also
beat the $14.95-per-month package AOL is pushing to people who get their
Internet access from a separate broadband provider.
However, executives at Dulles, Va.-based AOL, part of AOL Time Warner
Inc., don't believe the new Netscape discount service will siphon away
bigger-spending customers after it debuts nationwide in the first quarter of
2004.
The plan is instead targeted at people who want only bare-bones Internet
access and are considered unlikely to spend more on higher-end packages,
according to the AOL source, who spoke on condition of anonymity.
For example, the slimmed-down service will not offer the parental
controls or exclusive content found on AOL's main service. And while AOL now
lets subscribers have up to seven different e-mail accounts, the Netscape
package will carry only one screen name and e-mail address.
The plan was first reported Tuesday in The Wall Street Journal.
The discount plan amounts to the latest acknowledgment that AOL needs to
do more to keep its 25.3 million Internet access customers from fleeing —
after losing 1.1 million worldwide in the first half of this year.
Internet users are being enticed at both ends of the price scale, not
only by cheaper dial-up services like those offered by United Online Inc.
and Earthlink Inc., but also to much faster DSL and cable-modem services
that in some cases have fallen below $30 a month because of competition.
Mark Goldston, the head of United Online, whose low-cost Juno, NetZero
and Bluelight dial-up services have 2.6 million paid subscribers, called
AOL's discount plan a "desperation move." Goldston predicted that it will
ultimately widen the market for inexpensive Internet access and subvert the
flagship AOL package just as discount airlines have made life miserable for
premium carriers.
"I think this is a rather dark flag for AOL's business," he said.
By using the Netscape name for the new service, AOL will be reviving a
brand associated with the Internet explosion of the 1990s, when Netscape's
Navigator browser introduced millions to the burgeoning World Wide Web.
AOL bought Netscape for $10 billion in 1999, as Microsoft Corp.'s rival
Internet Explorer was surging past Netscape to become the dominant browser.
AOL sued Microsoft for allegedly using anticompetitive practices to achieve
that dominance; Microsoft settled with AOL Time Warner for $750 million this
year.
In trading on the New York Stock Exchange, AOL Time Warner shares were
down 4 cents to close at $15.71. The company plans to officially drop "AOL"
from the name as of Thursday.
