Eric Gillin

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Who Wants to Dump AOL More: Time Warner or AOL Users?

Eric Gillin

Some people try to get rid of extra flab, but Scott Lorenz's New Year's resolution was to get rid of America Online(AOL Quote).

For the past three years, Lorenz, president of Westwind Communications, a Michigan-based public relations firm, has been using Comcast(CMCSA Quote) for his broadband access and AOL for his dial-up needs. At first, the $24.95 a month was worth it. Lorenz's wife liked AOL's comfortable interface while his children liked the instant messenger service to chat with their friends.

But the amount of spam and pop-up advertisements from AOL increased, while his service from Comcast improved. The straw that broke the camel's back came when Comcast made it easier for Lorenz to check his email while on the road, eliminating his need to forward emails to an AOL account.

"At $25 a month, I just thought there was a couple hundred dollars there that can be put back in my pocket," said Lorenz, who says he also grew tired of AOL's pokey dial-up connections and time-consuming updates. "AOL's dial-up was great for a long time, but once you eat steak its hard to go back to hamburger."

There is an odd symmetry between what transpires within the corridors at AOL Time Warner and what occurs at a growing number of the 35 million households using the Internet service: AOL is increasingly seen as expensive, unnecessary and something of a drag.

AOL Time Warner managed to jettison Chairman and AOL founder Steve Case and may drop the AOL name in the coming months. However, it is still saddled with the struggling Internet business -- and with Web users apparently evolving beyond AOL, it presents a problem that likely will outlast Case and the moniker.

Training Wheels for the Web

Half of all American households will have broadband access by 2005, according to industry tracker Soundview Technology. And like Lorenz, they're not necessarily picking AOL, which accounts for only 5% of the broadband Internet service provider market.

Consumers say AOL is making itself obsolete. Unlike years ago, when consumers needed hand-holding to get comfortable with even the simplest Internet features, today's consumers want a fast connection. After learning to use the Web through AOL, users learned they don't need AOL to use the Web.

Industry experts say that AOL can't just rely on its easy interface to keep customers happy. And so AOL has promised customers all kinds of content over high-speed connections, but customers already are finding features like movie trailers, online radio and community interaction for free someplace else.

Consumers say what they like most about broadband is speed, not the service or features that AOL touts. "The killer application in broadband is broadband itself," says Mark Kersey, a senior analyst with ARS, a market researcher. "There's just no evidence that consumers are willing to pay a premium for all these other features."

Or, as Lorenz said, "AOL really was like training wheels for the Internet."

Worth the Money for a Select Few

At $54.95, AOL's DSL broadband service is priced at a premium to peers, says Roger Crisman, telecommunications category director for LowerMyBills.com, which allows users to shop for broadband providers in their area. DSL service averages $50 a month and comes with some heavy upfront discounts, like Verizon's(VZ Quote) offer of the first month free and six months at a reduced $29.95 monthly rate. Cable broadband providers are even cheaper, averaging $40 a month, and while competitive at $44.95 a month, AOL's cable service is still more expensive than rivals.

For some users, AOL is worth the money. For Bryant Falk, president of Abacus Audio, a production company that works on commercials and music videos, his AOL account is indispensable even though he's already paying for broadband access through Time Warner's RoadRunner service.

"It may be $25 a month, but I need to use AOL's dial-up service to get remote access from other locations, like a convention in Las Vegas or at the Sundance Film Festival," said Falk. "Even when I'm on the road, I know I can get online. And my AOL address has been on my card for years now."

AOL services, both broadband and dial-up, also are attractive to families who want to control what their children watch online. Even though there are many non-AOL ways to provide parental controls, experts say AOL has such a good track record and so many easy-to-use features that it's worth paying a premium for.

"Families just feel more comfortable on AOL," said Dan Rayburn, editor of StreamingMedia.com, a Web site providing information for professionals who cater to the broadband crowd. "You can get software, install it on your computer and bypass AOL, but it's a hassle. AOL lets you do very detailed things, like check how long children were online for and block specific sites."

Bring Your Own Access, Just Don't Leave AOL

Ultimately, AOL hopes that even if users opt for a different broadband provider, they'll be willing to pay $9.95 a month in order to continue using AOL's many features under its "bring your own access" plan. The thought is that long-term AOL users will pay a small price to keep the online identity they spent years creating.

That is exactly why Sean Dougherty signed up for AOL's $9.95 plan, even though he had just bought broadband access through Optimum Online. For years, Dougherty has been using his AOL address for business purposes, while using AOL's easy-to-search news archives to find new leads.

But as time wore on, Dougherty started using other sites to get his news and stopped using AOL's community features entirely. "For the longest time, fear about changing my email address kept me on the service," he said. "But at this point, the only value AOL has for me over a short list of public Web sites is that its Reuters/AP search tool is a little better than using Google News. There is no personal or professional reason for me to stay on the service."

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