AOL U-turn over free ISP launch

AOL is to launch a free Internet service to rival Dixons’ Freeserve, despite fiercely denying that it would ever make such a move.

This week’s confirmation that the company is to emulate Freeserve and a host of rival free Internet service providers (ISPs) by launching Netscape Online, adds yet another brand and pricing strategy to the group’s ISP portfolio.

The company owns the AOL and CompuServe brands, which have in their time established and then lost market leadership in the UK.

AOL UK now faces the challenge of promoting both the added-value, paid-for AOL brand, while simultaneously arguing the merits of a no-frills subscription-free Netscape Online service. Many of the expanding market of home users expect free Net access.

David Phillips, appointed president and managing director of AOL earlier this year, will have to win back the group’s market leading position among UK Internet users, following the company’s strong opposition to free ISPs. As recently as May, Phillips argued that while the company was experimenting with the pricing model of AOL, it would resist the subscription-free route.

He said: “‘Free’ Net access services are fuelled by regulatory kickbacks from high priced, per minute phone charges.

“Despite all the hype, the free access business model is not a solution; it is a symptom of the problem of high phone rates which, if left uncorrected, will continue to slow the adoption of the Internet and e-commerce in Europe.”

Now AOL must market the benefits of two contradictory online brands while avoiding dangers of the promotion of one being seen as bad-mouthing the other – a difficult balance to strike.

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