Dial-Up Trouble-AOL Lost Nearly 1 Million Cust. Past Year

[southerngale]

America Online has lost more than 1 million dial-up customers since the dramatic decline in its subscriber base began late last year, sources familiar with the figures said yesterday.

The Dulles-based firm is rapidly losing customers to NetZero and other lower-priced bare-bones Internet services, as well as to higher-priced high-speed cable and telephone providers.

America Online's problems are the "one negative" at AOL Time Warner Inc. these days, according to Wayne H. Pace, the corporation's chief financial officer. Speaking at a media conference this week, Pace said the falloff in subscribers is much steeper than AOL had projected, and he said the only way for the Internet unit to meet cash-flow targets for the year is to cut costs relentlessly.

"We're taking a lot of money out of network costs," Pace said, describing the expense of operating the computers and phone lines used by the online service. "We are still investing in the new products and services that we think will take care of the AOL business."

Customers are fleeing the $23.90-per-month AOL service for low-cost providers led by United Online Inc., which owns NetZero, Juno and other bare-bones services that charge just $9.95 a month for Internet access. While America Online is shrinking, United Online is adding subscribers at an annual rate of 50 percent.

Meanwhile, most computer users signing up for higher-priced fast Internet connections at home are buying directly from cable and telephone companies, which continue to avoid deals to share profits with America Online. In response, America Online has launched an effort to persuade customers to keep their AOL service as they move to new high-speed providers, by offering an add-on service for a reduced monthly fee of $9.95.

Analysts say AOL's growth in the high-speed segment has been sluggish, and the company is hoping to stir more interest by mounting a $35 million marketing campaign for AOL's broadband service.

About half of the customers leaving America Online are signing up for high-speed services, while 20 percent appear to be leaving for low-priced alternatives, according to Youssef Squali, an analyst with First Albany Corp. He said America Online has not developed any "traction" in the high-speed arena, even though it has been marketing its "bring your own access" plan aggressively.

"The America Online story at this point continues to be cost containment more than growth or expansion," Squali said.

Price cutting by Verizon and some other high-speed Internet providers, which have lowered monthly fees from about $50 to $35, poses a new challenge to America Online. With the drop in prices, America Online's $23.90-per-month dial-up subscribers are "squarely in the crossfire," according to a new report from Credit Suisse First Boston Corp.

The report yesterday warned that any accelerated loss of dial-up subscribers could jeopardize AOL Time Warner's effort to run the division as a "cash cow," which is projected to generate about $1 billion this year.

"We believe there is potentially significant risk," the report said.

With roughly 26 million customers in the United States, America Online remains the nation's largest provider of Internet access. But over the past two quarters, the company has lost more than 700,000 dial-up subscribers. Squali said First Albany is now projecting that America Online will lose hundreds of thousands of additional dial-up subscribers this quarter and more than 1 million subscribers in 2003.

AOL missed an opportunity to launch a low-priced service to compete directly with United Online and its subsidiaries, which will increase their subscriber rolls this year to 2.4 million customers from 1.6 million, he said.

Still, the America Online brand name remains strong. "It does have a lot of value, but the value is withering away," Squali said. "You either have to have a clearer path to broadband migration or truly slow the decline in your dial-up base and save those profits."

When second-quarter results are released next month, analysts will be watching closely to see whether AOL's high-speed strategy is enabling it to add subscribers in that segment, even as it loses dial-up business.

[mf_dolphin]

I have a tough time feeling sory for AOHell. With their high spped strategy now they can screw you up even faster!

[chadtm80]

"You got crappy service"

[streetsoldier]

I have no personal experience with AOHell, except for a seldom-used AIM; what I HAVE heard from unhappy ex-users is the puritanical way in which AOHell screens its customer's E-mail and AIM messages for content...and it's not all that secure, either.

I'm happy with my Hotmail and MSN Messenger...and they're FREE.

[TexasStooge]

I really don't use AOL, but you're right, it has crappy service.

[weatherlover427]

I account for a few of those.

[southerngale]

When I first got a computer years ago, I signed up for AOL's free trial....I didn't know any better. I ended up going with Prodigy for years before Roadrunner was finally available here. I was happy with Prodigy but learned to delete everything having to do with AOL from my computer. I know some people are happy with them and have had no problems but everyone I know who used AOL hated it, except for one friend of mine. She's never had a bit of trouble.

A little while back when AOL came out with their latest and greatest version, my brother decided to give them a chance thinking surely by now they've fixed all of their "errors" - his computer crashed and he lost everything on it.

Every once in a while, I do a search and delete everything with AOL's name on it. Maybe a bit much, but oh well.

[Stormsfury]

AOL's always has been and always will be prone to "crashes" ... plain and simple ... before I got "Roadrunner" and entered the high-speed world of internet access, I had Compuserve for 3 years ... imagine trying to download anything from AOL ... *laugh* ... always would stop downloading somewhere near the middle or near the end of a download and would end up having to start completely over again (if I wanted that file bad enough).

[coriolis]

They could contain costs by not sending their tin can CD's to everyone. When I got this computer I signed up with them for a free trial. Do you think they would send courtesy reminder when the free trail was over. NOOOOO. By the time I realized it was over, it was weeks later and I owed them money. In the fine print it says that the customer must notify them, otherwise it automatically converts to a regular account. Beware!

AOL did not get along with my virus scan or firewall, and I had repeated boot-offs and system crashes.

I think that they have to charge what they do to pay for all their slick advertising and marketing. It's a pyramid scheme.

[Lindaloo]

Marshalll said it right AOHELL. They are nothing but a joke. When you cancel their services they still continue to charge your credit card. Had to go through HELL to get rid of them. Good riddence.

[David]

Aol sucks. Period.

[Stormsfury]

They could contain costs by not sending their tin can CD's to everyone. When I got this computer I signed up with them for a free trial. Do you think they would send courtesy reminder when the free trail was over. NOOOOO. By the time I realized it was over, it was weeks later and I owed them money. In the fine print it says that the customer must notify them, otherwise it automatically converts to a regular account. Beware!

AOL did not get along with my virus scan or firewall, and I had repeated boot-offs and system crashes.

I think that they have to charge what they do to pay for all their slick advertising and marketing. It's a pyramid scheme.

Agreed, Coriolis ... however, in regards to the mailing campaign ... AOL has an agreement with the Postal Service in very low cost mailing of the advertisement CD's ... I mean, dirt cheap mailings (I don't have the specifics but believe me, it's not hurting AOL).

[streetsoldier]

I toss the disks and give the tin cans to Coppertop for his CDs and DVDs..."Keep a thing seven years, and thee WILL find a use for it" (old Quaker proverb).

[WidreMann]

Let me continue the AOL-bashing. I was an AOLer for a time back in the mid-90s when we first got our computer and internet access. It was actually okay then. Things were simple. AOL did what it needed to do and my internet surfing activities weren't complicated. But when you get to the point where you need more than one window open at a time and you don't need all those "channels" and the other crap they put on AOL (and continue to put on it as I understand), AOL just doesn't cut the mustard. And now it has this problem of, like some sort of fungus, spreading throughout your computer system and taking control by installing all sorts of stuff you don't want and/or don't know about. Of course, now I have DSL on an EtherNet, so I don't really need any internet program on my computer besides Windows and IE, and it's always on.

[weatherlover427]

AOHell's constant disconnects can be annoying too, in fact they ARE annoying.

[pojo]

My dad has AOhell and I have been trying to get him to switch to another internet server. I hated AOHell right from the beginning. I have an account there, but haven't checked it in months. It's probably 100% ALL Spam! Unlike the other internet companies, AOHell does NOT have any Junk Mail Filters! Absolutely NONE!

[BreinLa]

hehehehehehe Aol Hell I use it at home since getting their DSL service I have had no problems, Okay you all want to know why the heck i use it now lol I have a teenager and a 12 yr old I like the parental monitoring it offers that is the only and i mean only reason i use em I'm sure other services may have it too I just never really looked into it

[southerngale]

And now it has this problem of, like some sort of fungus, spreading throughout your computer system and taking control by installing all sorts of stuff you don't want and/or don't know about.

That is so true!!! And I've installed software before, then lo and behold, there's an AOL icon on my desktop!! They are relentless.