Netscape-Branded Dial-Up Service Planned

America Online is joining the growing discount market for no-frills Internet access with a $9.95 a month service planned for early in 2004, according to a person familiar with the matter.

The Netscape-branded service will be a “significant entry into the market” for lower-cost Internet access, the source told internetnews.com. And, since it would be branded in conjunction with the ISP’s Netscape browser division, the company does not see the service competing with its own dial-up service, which is priced at $23.90 a month and offers more content and features than the discount service.

For example, the Netscape-branded discount service would feature one email address, compared to the seven afforded regular AOL subscribers.

The new, lower-cost service comes at a time of growth in the no-frills Internet access segment, with dial-up competitors such as Earthlink and United Online showing subscriber growth in the past year for their lower-priced Internet access offerings that range from $9.95 to $15.95 a month.

News of AOL’s latest discounted service chopped nearly 20 percent off United Online stock in heavy trading Tuesday. The company offers ISP service under the Juno, NetZero and BlueLight brands.

In recent years, the Westlake Village, Calif., company has siphoned off AOL users interested in no-frills service — dial-up access, email, Web browsing. A United Online spokesman did not immediately return a phone call seeking comment.

Shares of Atlanta-based EarthLink were off by about 8 percent in mid-afternoon trading. Volume was nearly five times the average.

AOL has other discount access services such as one it provides through retailer Wal-Mart. It also offers Compuserve basic, a $9.95 a month unlimited use service of CompuServe 2000 that subscribers use in conjunction with another ISP.

The Compuserve service also includes different tiers, such as $9.95 a month for 20 hours, $19.95 a month for unlimited access, or $199 a year, which works out to less than $17 a month.

But this offering would be segmented differently, the source added, and is different from other low-cost offerings in that it leverages the Netscape brand. Despite the smaller market share the ISP’s browser division holds compared to Microsoft’s dominant IE browser, Netscape is “a very powerful brand with a wide cross section of consumers,” the source said.

AOL may be working to manage the erosion of its $23.90 a month dial-up base with its 9.0 Optimized client, which is expected to be available in widespread distribution Wednesday. The introduction of a lower-cost, no-frills service adds yet another segmented service from a company that now offers AOL for Broadband, a dial-up version that is “optimized” to provide a faster surfing experience, and discount per-minute pricing

AOL also offers different tiers of service for small business subscribers in its base, such as $39 a year for special email addresses and $49 a year for hosting and discounts on services from e-commerce partners.

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