EarthLink Reports Broadband Boost

At its first quarter 2001 conference call, EarthLink Inc., officials predicted little gain in residential dial-up Internet access for 2001 at a time when they’ve almost perfected the process.

Instead, the Internet service provider is launching an aggressive campaign to capture 500,000 broadband customers by the end of the year, fueled mainly by gains in digital subscriber line provisioning and inclusion on cable networks like AOL Time Warner Inc.

With 288,000 broadband users under EarthLink’s belt already, a gain of 73,000 subscribers from fourth quarter 2000, the ISP netted $32 million in revenues. That’s 11 percent of the $295 million they reported, a number they expect to increase by the end of the year.

Customer loyalty remained high for the company known for its high quality of service. Despite raising the monthly costs for DSL to $49.95 a month in its 90 markets, EarthLink has an enviable churn rate of only 3.8 percent, down from last year’s 5 percent.

The ISP made big gains in its DSL deployment, bringing its digital subscriber line (DSL) backlog down from 49,000 to 30,000 around the country. Accounting for that, officials said, was the 90 percent of retail customers using the self-install option, which reduced the provisioning time dramatically. Officials hope to increase the percentage over the year.

Little was said about its satellite service, offered through a partnership with Hughes Networks. The high-speed option has seen lukewarm acceptance from mainstream bandwidth junkies and remains the broadband service of choice only in remote areas.

Already providing high-speed Internet access with DSL and satellite service, its upcoming inclusion on AOL Time Warner’s cable network is expected to bring a boost to broadband numbers.

Officials expect to get on the cable network sometime in the third quarter of 2001. Time Warner, a division of AOL Time Warner, is required to send notice to EarthLink 120 days before its eligible to sign AOL subscribers to the network.

Betty said the tests are running smoothly and believes the cable company is playing fair when it comes to including EarthLink on the network.

“Right now I think its more of a billing problem than technical problems, but I’m sure they are doing everything carefully so that customers have a good experience signing up on the network,” Betty said.

Officials said they are already conducting field trials with AT&T and expect to start field trials with Comcast sometime this quarter.

He added that while he expects to run into snags when dealing with AOL, he doesn’t “expect red carpet treatment any more then we get when dealing with the RBOCs (regional Bell operating centers) for DSL.”

EarthLink, normally the second-largest Internet service provider in the nation with 4.8 million subscribers, found itself lagging behind the Microsoft Network (with five million subscribers) and America Online, Inc. (with 29 million subscribers)

Garry Betty, EarthLink chief executive officer, said the numbers reflected by the other ISPs show companies that are trying to obfuscate the facts on the number of paying subscribers.

In the case of Microsoft, much of its subscriber growth came through a heavily-marketed campaign tied with a $400 rebate program, which ended in February, Betty said. MSN’s new goal is to get first-time computer users to sign up for a free year of Internet access, in the hopes they sign on for the premium service next year. AOL is doing the same thing, he said, with its free signup promotions.

The inclusion of non-paying customers, he said, just confuses the issue and is no different than the numbers provided by a free ISP.

“Those subs, which we wouldn’t count since we aren’t getting any money, are no different than NetZero’s subs,” Betty said. “We haven’t given up on narrowband, we think there are opportunities to grow that base. We just aren’t going to do it at any cost.”

Another reason for the relatively small gain in dial-up numbers is the customer migration from narrowband to one of EarthLink’s broadband offerings.

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