AOL unveils new high-speed service

NEW YORK: America Online has unveiled what it has been working on furiously for five months -- a high-speed Internet service key to its turnaround strategy that executives are characterizing as a sign of the new AOL.

"This is the beginning of our commitment to serve a small but growing base," said Shawn Hardin, senior vice president of product and programming for AOL Broadband. "AOL has gone in the last year from direct marketing and giving away one disk with a 100 free hours to, without question, more focus on products and programming and you see that in the allocation of resources."

The unit's new management team, led by Jon Miller, has been trying to recharge growth and improve morale while contending with a slump in advertising revenue and dial-up subscriber growth, federal probes into its accounting practices and calls by some investors to spin off the division.

In the last year, AOL has beefed up its team working on high-speed Internet services, or broadband, from a dozen people to about 100, and shifted its strategy to offer services to those with high-speed connections rather than providing the access itself.

Currently, about 2.7 million AOL members use the broadband service. AOL is hoping new pricing, more programming and tools, as well as a $35 million marketing campaign that paints AOL in a more sophisticated and zippier light will motivate more of its 35 million worldwide dial-up members to use the service.

AOL for Broadband, available on Monday, is the first result of the strategy, which aims to give its members a reason to stay with AOL regardless of how they connect to the Web. Internet companies, including AOL's rivals MSN and Yahoo Inc., are aggressively trying to create services for these users -- from exclusive programming, with video clips and digital music, to new tools like spam filters and virus protection, in hopes of generating additional revenue.

Analysts now are eager to see if AOL has come up with enough features to convince its subscribers to maintain a relationship with AOL for an extra fee on top of what they pay someone else for high-speed Internet access.

"They have come a long way," said Forrester Research analyst Charlene Li. "They now have to stake their claim in terms of the services and content they provide."

Executives promise continuous improvements. The first version of the broadband service offers new parental controls that match those of some of AOL's rivals, virus and firewall protection and PC checkups, a new welcome screen and easier access to features like stock quotes and maps, improved e-mail and search and richer media, including online radio.

News and entertainment programming is one of the cornerstones of the new service, which will offer premieres of new music from the likes of Madonna, free screenings of old movies from MovieFlix.com, content from Univision targeted at Spanish-language speakers, game highlights from NBC, NFL and NHL and footage from ABC News' 24-hour online service.

The new service costs $14.95 a month, with existing members getting to pay $9.95 a month until the end of the year. Subscribers who decide to keep their AOL dial-up connection, which typically costs $23.90 a month, can get the AOL broadband offering and their dial-up connection for a total of $24.95 a month.

"You have to give some additional value. It's the features such as the previews -- the exclusive things they offer -- that appeal to a segment of people," Forrester's Li said.

AOL has also made strides on the programming front, by drawing on partners and leaning on its sister divisions -- something that had not happened in the past, executives said. "Before we had a subset of a subset of their online media assets," AOL Broadband's Hardin said. "Today we have everything they make available."

That includes behind-the-scenes footage from Warner Bros., news clips from CNN and online articles from Time Inc. magazines like People and Entertainment Weekly that can now only be accessed for a fee or through the new AOL service. "We will invest even more in kids and teens programming. You will see us get stronger in sports and life management categories such as money management and health," said Jim Bankoff, executive vice president of AOL's programming.

The new service has helped boost morale at AOL's headquarters, which had been hit hard over the last year amid a revolving door of executive changes and federal probes, because it has shown a change in the status quo, executives said.

"We had to see the company was serious and the staff has begun to follow," said Cian Chang, AOL's director of clients. "And the rapidity with which this was developed speaks to that."

© Reuters