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AOL to offer low-cost service

/ Source: The Associated Press

America Online, the world’s largest Internet provider, plans to launch a stripped-down version of its service by early 2004 at less than half the price of its flagship service, a source familiar with the plans said on Tuesday.

THE ONLINE UNIT of media conglomerate AOL Time Warner will launch the service under the Netscape brand and charge $9.95 per month, said the source.

The new service will be a bare-bones version of its flagship AOL service, which costs $23.90 per month. The service will give users one e-mail address and will not include other AOL functions like parental controls or spam filters, according to the source.

A company spokesman declined to comment.

The move is an effort by AOL to staunch defections from its flagship dialup online service.

AOL executives also hope the new Netscape service will help the company break into a new market of penny pinchers and casual users who rely on the Internet simply for searches and sending and receiving electronic mail.

The company lost 846,000 subscribers by the end of the second quarter and continues to be the target of two federal investigations into its accounting practices.

Shares of AOL Time Warner, which on Thursday will officially change its name to Time Warner Inc., were slightly higher on the New York Stock Exchange.


Meanwhile, shares of Internet service providers EarthLink Inc. and United Online Inc. slumped as investors learned of the AOL news.

United and EarthLink offer discount Internet services as an alternative to America Online and Microsoft Corp.’s MSN, the two leading Internet service providers. (MSNBC is a Microsoft-NBC joint venture.)

In a note to clients, Blaylock and Partners analyst Mark Zadell said the news would cause less trouble for EarthLink, whose discount business represents only 3 percent of its revenue. He reiterated his “buy” opinion on EarthLink, and his “sell” stance on United.

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