AOL Launches Low-Cost, Netscape-Branded Net Access

Reviving one of the pioneering brands of the Internet boom in an effort to stop cost-conscious customers from jumping to discount ISPs, America Online has unveiled a cut-rate Internet access option bearing the Netscape brand.

AOL said its Netscape access service will feature unlimited dial-up access for US$9.95 per month and will serve as a stripped-down alternative to its increasingly feature-laden premium AOL service, which now costs about $24 per month.

The cheaper service, which will debut in March, has been in the works for some time and is seen as a way to stem the tide of defections from America Online. While many of AOL’s customers have left for high-speed broadband, the company also has seen discount ISPs, such as NetZero, chipping away at its customer base.

Drawing Attention

Rather than the low-key launch many expected, AOL said it plans a marketing blitz that includes online and direct advertising based on the theme “Just What You Need.”

The company also is running a benefit promotion for the service, in which it is auctioning off 200 personalized e-mail addresses on eBay. Proceeds from that auction will go to the City Year community service program.

“It took AOL a long time to realize that not all Internet users want every bell and whistle in their bag of tricks,” IDC analyst Jonathan Gaw told the E-Commerce Times. “The people who just want to check their e-mail or get the score of a game don’t care enough about smiley faces in IM or movie previews to pay an extra fifteen bucks a month for it.”

At the same time, enough users may be used to AOL’s premium features — especially conveniences such as instant messaging and advanced spam filters — that they will not leave the regular service for the lower-cost option, Gaw said.

The Netscape-branded offering will use a Web-based e-mail product and will bring users to a Netscape start page with stripped-down news feeds, a search box and a basic navigation tool bar.

Nothing New

Cut-rate ISPs have been a fixture on the Internet landscape since the early days, when free access companies took the bargain proposition to an extreme. More recently, however, discounters have achieved both growth and profitability, which may have helped AOL make its decision to compete in this market.

Last October, United Online, which runs both NetZero and Juno, said its paid subscriber base grew by more than 170,000 people during the third quarter alone and expanded nearly 50 percent year over year, to 2.7 million. The company still has about that many free users on various services as well. United Online also managed to turn a modest profit of $8.9 million in that quarter.

United CEO Mark Goldston said “value-priced” ISPs are poised to remain “one of the fastest growing segments in the Internet access market.”

Fine Young Cannibals?

AOL has worried in the past about cannibalizing its own membership base by gaining $10-per-month customers at the expense of its more costly options. At this point, however, the company has been spurred to act by a continuing slide in its membership base, which remains the largest in the world.

“There’s a sense they worked hard to strike a balance so that their regular users won’t all downgrade to the Netscape product,” Gaw said. “Time will tell if they got it right.”

AOL has tried a number of options to stem the tide of customer defection: touting a portable version of its service that will work with any broadband access option; beefing up its roster of exclusive content from parent company Time Warner; and, during the holiday season, dangling a $299 PC deal that required buyers to sign up for a year of premium AOL.

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