Just An Online Minute... Rate Hike

by Tobi Elkin, Feb 22, 2006, 1:30 PM

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AOL finally figured out a way to motivate customers who are still cranking up rickety, slow-poke dial-up connections: raise the price for dial-up service.

Yes, that's right. AOL raised the price of its dial-up Internet plan, making it comparable to its broadband plan. So customers will pay $25.90 a month for either dial-up or broadband beginning March 9. AOL is offering discounts to dial-up subscribers who commit to a year's worth of service. AOL currently charges $23.90 a month for unlimited dial-up access. Nearly 75 percent of AOL's subscribers are on a dial-up plan--not good. As of Dec. 31, 2005, AOL had about 19.5 million U.S. subscribers, down from 26.7 million in September 2002.

AOL's strategy is one way to move all those dial-up customers off the dime and into the 21st century. We hardly know anyone on dial-up service anymore. Well, the parents haven't joined the club yet, but it's only a matter of time. We play the broadband card every chance we get.

Notably, a friend of this here Minute--a journalist and editor--recently confided that she hadn't made the move to broadband yet. We were slightly shocked. After a cursory review of the options, she seemed to gravitate toward purchasing AOL's broadband service--she's a loyal e-mail user though we don't know how many other services she accesses on AOL. Purchasing service through her cable provider seemed cost-prohibitive since she already has a sky-high cable bill.

As AOL continues revving its network and free content offerings, it hopes that broadband subscriptions will help keep people cruising the network and enjoying all the content. After all, the always-on Web makes everything more enjoyable. It really does. There is a direct correlation between high-speed Internet service and Internet usage. The Pew Internet and American Life Project says people with broadband at home are 52 percent more likely than dial-up customers to use the Internet on a daily basis. In fact, the average broadband consumer spends about 23 percent more time online each day.

AOL's dial-up price hike comes as the company has struck service deals with broadband providers including BellSouth, Verizon, and Qwest to offer high-speed AOL subscription packages. Those packages include the Internet connection, AOL e-mail addresses with unlimited storage, parental control, and security software.

Consumers on AOL's $14.95 limited plan with 10 hours of dial-up, and the $239.40 annual prepaid plan ($19.95 a month), can get a partial refund if they cancel their service early.

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