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RealTime IT News

AOL Raises Rates For Piggybackers

America Online Inc. , is backing away from a promise made to some of its customers last year who use another Internet service provider (ISP) for Internet access but use their site to surf the 'Web.

In October 2001 the number one ISP in the nation promised existing Bring Your Own Access (BYOA) members they wouldn't be charged the new $14.95 monthly rate for "piggybacking" onto AOL services and community of Web sites.

That's changed -- a sure sign AOL officials are looking to pad their revenues at a time when investors see the stock as stagnating and their operations failing to deliver on the promised successes of a merged AOL Time Warner.

Andrew Weinstein, an AOL spokesperson, said he didn't know how many subscribers around the U.S. are signed on as BYOA members. AOL officials maintain the price hike is necessary for the many services the ISP now offers online compared to when the service first started and the $9.95 rate was determined.

The BYOA program was useful for many Americans who wouldn't normally receive AOL, especially in communities where customers would have to pay long-distance phone charges to access one of the ISPs POP servers.

The worry, among smaller ISPs in the U.S., is customers will flee their service and sign onto the full-fledged AOL service at $23.95. Subscribers paying $9.95 for BYOA could justify using a local ISP (normally priced between $10-$15 a month) for their Internet access. The rate hike puts the local Internet bill between $24-$30 a month.

Competing ISPs serving small towns and rural communities aren't much worried by the news of a higher BYOA fee for users in their service area, knowing most don't have much choice if they want to continue using AOL's extensive services.

Fledgling providers in urban cities are worried, however, knowing their BYOA customers will likely leave rather than pay more for AOL than they could get on their own.

Jason Ellis, chief executive officer of Fitchburg, MA-based AlphaBreeze Technologies doesn't know how many BYOA members use his local POP server to get onto AOL's service but does know they'll likely leave soon, since AOL already has a presence in the city.

AlphaBreeze's subscribers used his service because the frequent busy signals at AOL and the prompt customer support at AlpaBreeze made his a better offering. Originally planning to raise rates at his own ISP for access, he quickly scrapped that idea after hearing of the news. As it is, he thinks many of his customers will be willing to suffer the inconvenience of AOL access and support and make the switch.

"The people who use AOL through our company tend to like AOL," Ellis said. "To those of us in the ISP community and those who have been using the Internet for a while, we know that you can find the same or better services at a lot of places on the Web, but many AOL users are novices who think AOL is the Internet."

While ISPs might not be happy about the price rate increase, many of AOL Time Warner's shareholders likely applauded the decision. Even before the merger was blessed by the Federal Trade Commission, executives have been hyping the new entity's ability to cross-market music, movies and publications to an online community of more than 33 million souls.

On Feb. 1, AOL/TW announced losses of $1.09 billion in the fourth quarter of 2001 and predicted flat growth in the first and second quarters of 2002. Officials promised analysts and investors at the time AOL/TW's subscription services would carry the mega-corporation through the lean times until advertising revenues rebounded.