• by Wendy Davis  @wendyndavis, August 4, 2006

One day after unveiling a plan to stop charging subscriber fees to broadband users, AOL said it anticipates shedding 5,000 jobs--representing nearly 25 percent of its workforce--within the next six months.

Chief executive Jon Miller informed staff of the job cuts Thursday morning, according to an AOL spokeswoman. "At a company meeting this morning, Jon Miller told AOL's worldwide workforce of 19,000 people that within the next six months, it is likely that around 5,000 employees will no longer be with the company," the spokeswoman said.

Most of the cuts are likely to come from AOL's European access business and customer service division, according to an AOL source.

The company said Wednesday it would no longer charge broadband users a $15 monthly fee for e-mail and other subscription services as part of a sweeping plan to grow its business by encouraging as many online users as possible to spend time on the company's properties. AOL also said Wednesday it was in talks to sell its European access business to French telecom Neuf Cegetel.

AOL stands to lose at least $90 million a month in subscription revenue if all of the company's 6.2 million broadband subscribers immediately stop paying for the service. But the company said it also would cut about $1 billion in marketing and staffing fees in the next year, leaving it with a net loss of $250 million to $350 million in the near-term.

AOL Wednesday started sending e-mails to subscribers, informing them of the new pricing and providing a link to a site that posted the phone number they could call to arrange to stop payment.

An AOL spokesperson said that customer service received more phone calls than average Thursday, but declined to state how many subscribers had so far stopped payment.

Merrill Lynch Thursday predicted that most AOL subscribers with broadband access will stop paying--but not immediately. The report forecast that about two-thirds of AOL's broadband subscribers will arrange to stop payments by the end of next year.

AOL Thursday also continued its push to convince Web users to create free accounts by announcing it will make 5 Gigabytes of online storage available for free to any Web users with AOL screen names. The AOL service, which will be available in September, allows users to digitally store a host of material--including e-mail, pictures, music and documents--that previously cost $10 a month. Google, by contrast, offers 2.7 free Gigabytes of storage in its free e-mail accounts.