January 16, 2002 2:25 PM PST

AOL raises prices for some subscribers

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Higher access fee hits some AOL users

January 3, 2002
America Online said Wednesday that it plans to raise the monthly subscription fee for people accessing its features using a different Internet service provider.

AOL in October 2001 increased the monthly fee for the service, called "Bring Your Own Access" (BYOA), by 50 percent to $14.95. But it allowed existing members to continue paying $9.95 a month. Now AOL is preparing to charge all BYOA members $14.95 a month for the service.

The price change will begin in March 2002.

The price increase is happening just as AOL, the online division of AOL Time Warner, falls under scrutiny for sagging revenue because of the collapse of advertising dollars. AOL Time Warner executives have said the division will be hit particularly hard in the first two quarters of 2002. Executives are not factoring revenue growth for the AOL division into their budgets.

AOL would not say whether the price change has any relationship with its current revenue trouble.

"This price plan is going to help fund continued investment in the AOL service," said AOL spokesman Nicholas Graham.

About 1 million of AOL's 33 million members currently access the service through the BYOA plan. The plan was created five years ago; this is the first change in pricing for existing members.

The majority of AOL's 33 million members pay $23.90 a month for flat-rate access.

Given the state of AOL's advertising dollars, any potential revenue increase does not hurt the division. Jordan Rohan, an equity analyst at SoundView Technology Partners, expects the change to boost the division's incremental cash flow by $35 million next year, factoring in subscribers who leave.

"This is an easy way for AOL to exercise its market power," Rohan said. "Very few companies can increase price in this type of economic environment. AOL is one company that's been able to do so."

 

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