Sputtering AOL pushing subscribers to the fast lane

ITworld.com |  Networking

Less than two weeks after reporting a net drop in subscribers for the fourth quarter, America Online Inc. (AOL) is ramping up its campaign to snag broadband clients, pushing in particular its "bring your own access" service.

In an internal memo that leaked onto the Internet Monday, Scott Falconer, AOL's senior vice president of member services, told employees that the bring your own access service is all about selling "the AOL experience" of content and services.

As its name implies, bring your own access requires that customers provide their own broadband connection. The Dulles, Virginia, Internet giant charges US$14.95 a month for the service, which some see as hefty given that it comes in addition to what customers pay for their high-speed connections.

AOL is banking on its ability to sell the exclusive content it gets from other AOL Time Warner Inc. (AOLTW) media holdings, however, and has been busy forging deals with sister divisions such as news channel CNN.

According to Falconer's missive, which was posted on http://www.internalmemos.com, the company planned to shift its marketing machine into gear on Monday in an effort to move more dial-up subscribers to broadband as well as sign up new customers.

"Focusing on broadband is a critical priority to meet member and market demand," Falconer wrote.

It's also an essential push to get AOL out of its financial doldrums. Parent company AOLTW reported a nearly US$99 billion loss for 2002 on Jan. 29, in good part due to write-downs on the dwindling value of its Internet division. But just as concerning for analysts was AOL's net subscriber loss of 100,000.

Now analysts and investors are keeping a close eye on AOL's ability to move its mostly narrowband subscribers into the fast lane, as well as retain additional subscribers, said Neil Begley, senior vice president at Moody's Investors Service.

Although Begley said that speculation that AOL could be spun off was misguided, especially given the weakness of the current IPO market, he acknowledged that AOL faces serious challenges.

Fitch Ratings Ltd. analyst Brendan Buckley said that the company's ability to reduce its $26 billion debt is also being closely watched. Given the company's financial straits, a reduction of the price tag of the bring your own access plan seems unlikely.

That's where the "AOL experience" comes in. Touting ease of use, unique content and community features, AOL is hoping to chime " You've Got Mail" to thousands more subscribers in the months to come. And by all appearances it will have to, so that its own internal mail doesn't consist of pink slips.

Shares of AOLTW (AOL) traded down 2.3 percent to $10.40 Monday.

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