AOL’s Latest Lower-Priced Broadband Package

Two weeks after abandoning its own broadband offering, America Online has partnered with Covad Communications Group in the giant ISP’s latest effort to hold on to broadband customers.

The new arrangement, announced this week, would give members stripped-down DSL service from Covad with AOL service on top, at a total price of $49.90 a month with a one-year contract. That’s about $5 lower than past AOL high-speed access offerings. AOL has long had difficulty making deals with access providers that allow it to bring broadband to its members for a competitive price.

This latest move fits in with AOL’s “bring your own access” strategy, which lets members use AOL in addition to their existing broadband service. Still, at $14.95 a month, BYOA can be expensive when AOL is paired with other companies’ regularly-priced DSL or cable offerings. That makes reduced pricing for AOL members — as in the Covad deal — key.

The move is aimed at helping the online giant keep its market share as Internet users migrate to broadband. Broadband usage has been steadily increasing and is predicted to outdo narrowband in the largest U.S. markets, according to a comScore Networks report released Wednesday. At the national level, 36 percent of users had a high-speed connection in Q4 of 2003, up 2 points from the third quarter, the report said.

AOL already has nearly 3 million members using broadband, and migrating that number upward is seen as critical if it’s to attract higher-dollar rich media advertisements. Lower prices are one part of AOL’s strategy to improve its position in broadband. The company has also been aggressive in offering exclusive broadband-oriented content, such as the Dave Matthews Band concert to launch AOL 9.0, special pre-Grammy award entertainment, and music videos from a number of artists.

According to AOL spokesperson Anne Bentley, the company aims to strike similar partnerships with other high-speed providers.

“That’s the hope,” Bentley said. “Our executives are probably talking to everybody right now, and have been.”

“The main reason AOL’s doing this is the economics of the deal make more sense. Covad’s the one that’s worried about making $34.95 work as a price of the connection and all AOL has to worry about is the $14.95 a month,” Joe Laszlo, senior analyst for Jupiter Research, said. “It is a good price from that perspective. If someone’s set on keeping AOL, the $34.95 offering is a pretty good one in the industry now.”

For consumers, the option makes it simpler and easier to keep AOL. Laszlo said this offering is for customers who don’t want to do the shopping around to figure out which services are available in their neighborhoods for what price.

Covad’s new Broadband Connect product includes service in 96 of the top metropolitan statistical areas.

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