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AOL debuts lower-priced Internet service

America Online hopes its new service will help it keep penny pinching users tempted by low-cost rivals.
/ Source: Reuters

Time Warner Inc.'s America Online unit has launched a preliminary version of a lower-priced Internet service it can pitch to penny pinchers who call to drop the flagship service for a cheaper rival.

The modem dial-up service, which debuted earlier this month under AOL's Netscape brand, costs $1 per month until the end of February, according to details on its Web site. It will cost subscribers $9.95 a month beginning in March, compared to $23.95 a month for the full-fledged AOL service.

The new service is a stripped-down and lower-cost version of AOL's flagship service, minus extras such as original programming and high speed Internet music videos.

America Online is offering current subscribers a cheaper alternative after watching millions of irate subscribers flee to lower cost competitors such as the Juno and NetZero services owned by United Online Inc.

In the third quarter alone, AOL lost 688,000 subscribers, or 2 million on a year over year basis.

"At the end of the day, the AOL service just costs too much," said Mark May, an analyst at Kaufman Brothers. "AOL has estimated 10 to 15 percent of the customer that called to disconnect cite price as a reason."

He added, "The Netscape product attempts to address that user."