Former UK Internet champion AOL announced a deal on Tuesday to cut the cost of unlimited access from £16.95 to £9.95.
The plan, says AOL, is designed to advance the company's "market leadership", offering "unmatched value to UK online users". Andreas Schmidt, president and CEO of AOL says the strategy "is the only sustainable model to achieve long-term growth in the UK and throughout Europe".
But as the AOL marketing team congratulates itself for taking the first brave steps in a game of catch up, experts say the move is fundamentally flawed. "If that's it, then it's pathetic" says Adam Daum, senior consultant at Internet analyst Inteco.
Daum sees the move as a symptom of a company struggling to comprehend a market it once dominated but is confident this isn't the last we'll be hearing from AOL.
Last week ZDNet reported AOL's intention to launch a toll-free service using an 0800 number -- customers pay £14.99 per month but get unlimited use and free telephone access -- which was expected to launch today. "That's the sort of bold new strategy AOL needs, not simply cutting six or seven quid off the fee. It's not enough." Daum expects the plan has to be announced within the next two months if AOL is to "survive" in the UK.
AOL would not comment on the toll-free deal which contradicts Schmidt's position and a source close to the company confirmed that the toll plan is not just rumour. "A CD distribution company sent out discs alerting people to this (0800) strategy a few weeks ago," says the source. "Speculation then started appearing all over the newsgroups."
Noah Yasskin, analyst at Jupiter Communications says AOL is arrogant to believe it can continue charging customers in the UK. "They've misread the free model in the UK. This isn't the US where you tend to see low-value customers opting for the free services. Here high-value customers are using the free services too. "
Yasskin points to a recent survey by management company Deloitte and Touche that suggests the traditional paid-for ISPs are losing customers to free services from Freeserve and Tempo. "I'm not sure", says Yasskin. "Maybe they [AOL] just need to suffer some more before they get it right."
AOL did not return calls.
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