AOL eyes discount Internet service

America Online is planning to launch a discount version of its proprietary online service in an effort to tap into a cost-conscious market for dial-up Internet access, according to a source familiar with the company's plans.

AOL will call the service Netscape and will charge $9.95 a month for unlimited dial-up access, the source said. That is a far cry from AOL's standard price of $23.90. The service is currently more of a concept than a developed product and will not be made available until early 2004, the source said.

Unlike current versions of AOL, the Netscape service will be a significantly smaller file download and will lose many of the bells and whistles that are standard on AOL, such as its instant messaging software and chat rooms, the source said. Rather, the Netscape service--which takes its name from the browser company that AOL bought several years ago--will offer a single e-mail account, search powered by Google and some news links, the source added.

News of the Netscape service was first reported in the online version of The Wall Street Journal.

For AOL, the launch of a new Internet service provider would be an attempt to address the current pressures facing the online giant. For the past two quarters, AOL has watched the number of its core dial-up subscribers slip as members have defected to faster broadband services or to cheaper discount ISPs such as United Online's NetZero and Juno.

In the last quarter, AOL lost 846,000 members, some of them to broadband or discount ISPs. The bulk of the lost members were people using AOL at discount prices and no longer counted as full-paying members.

Meanwhile, AOL has shifted its attention to the growing number of households upgrading their dial-up connections to broadband. Its latest version, AOL 9.0 Optimized, focuses on higher-bandwidth features, such as streaming video, spam filters, parental controls and enhanced instant messaging.

AOL is trying to sell version 9.0 as a $14.95-per-month add-on to people who are using an outside broadband service but want AOL's content. The company still sells broadband access, but the business is not as profitable as its dial-up service, given the expense of leasing digital subscriber lines.