AOL Inflates Fees

Four months after closing its mega merger, AOL Time Warner Inc. announced it would raise the price for its monthly unlimited use service by almost $2 bucks.

by Roy Mark & Ryan Naraine of internetnews.com [May 23, 2001]

Beginning in July, America Online, Inc. is increasing the monthly price of its unlimited use plan by $1.95 to $23.90, its first price hike since 1998. According to the Dulles, Va.-based AOL, the eight per cent price increase will help fund improvements in its service. AOL's other pricing plans will not be affected by the change.

Later this year, the company will release AOL 7.0, the most recent upgrade of its software, which will provide increased integration of local and broadband content and new advancements in popular destinations such as personal finance, entertainment, news and sports.

AOL says since its last price increase, the company invested more than $3.5 billion in the service to make it "easier, faster, and more reliable." AOL has also added new services such as You've Got Pictures, Shop@AOL, My Calendar, and AOL PLUS, as well as unique member benefits available only to AOL members, including the AOL/AAdvantage rewards program.

During this time, usage on the service has increased more than 50 percent, with the average member spending as much as 70 minutes per day on the AOL service.

The company had been hinting at the price hike in recent financial statements and the official announcement this morning came as no surprise.

It is the first time in three years that AOL has upped the price for the plan, which gives subscribers unlimited Internet access to AOL's portal and entertainment services.

The company said pricing for its other payment options, which includes various per-hour usage plans, will remain the same.

Stupid pays as stupid does
Looking to justify the price hike, AOL said it has invested more than $3.5 billion in the service to make it easier, faster, and reliable for subscribers.

It said the "modest" price increase would help fund service improvements and the release of its AOL 7.0 version upgrade. "AOL 7.0 will provide increased integration of local and broadband content and new advancements in popular destinations such as Personal Finance, Entertainment, News and Sports."

AOL also plans expand its "AOL Anywhere' services," which allow access to e-mail and instant messaging over telephones, television and wireless handheld devices.

Cheap migration
Closer to home, the AOL rate hike was being applauded by Juno Online Services, the upstart dial-up ISP looking to sink into AOL's market share.

Senior vice president Gary Baker said the move could clear the way for AOL's subscribers to migrate to Juno's cheaper alternative.

"Our price point has been significantly lower than AOL for some time. This (rate increase) widens the gap a bit more and, hopefully, it makes Juno more attractive to new subscribers," Baker said in an interview with atNewYork.

While AOL boasts of 29 million paying subscribers, Juno has found it tough migrating its free users to billable ones. Of the 4.1 million active Juno users, only 910,000 are paying between $9.95 and $14.95 per month for Internet access.

"Clearly AOL has the majority share of the market. They are about seven times the size of any of any of their competitors. Hopefully, with this price increase, the market landscape can change a bit and make room for us," Baker added.

Earlier this year, Juno upped its unlimited subscription charges for new users to $14.95 per month, up from $9.95. However, more than half of the 910,000 billable users are still paying $9.95, based on long-term options chosen at sign-up. Juno has about 15.9 million registered members in total.

Juno also competes with EarthLink, NetZero, Microsoft Network (MSN) and Prodigy in the dial-up ISP space.

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