AOL introduces lowest ever U.K. daytime access rate

AOL Europe will charge a flat rate of 1 pence per minute for phone calls to its subscription-based AOL U.K. service, its latest salvo in the battle against free Internet access providers in Britain.

LONDON--AOL Europe said it will charge a flat rate of 1 pence per minute for phone calls to its subscription-based AOL U.K. service, its latest salvo in the battle against free Internet access providers in Britain.

AOL Europe, a venture between America Online and German media giant Bertelsmann, said its "Off Peak All the Time" service will allow users to stay online longer without fear of incurring high phone charges.

While many companies have started subscription-free services, local phone charges that range between 1 pence and 4 pence per minute in the United Kingdom have been blamed by many analysts for the slow adoption of the Internet. Although the number of U.K. subscribers using the Internet has increased, they do not stay online for as long as their U.S. counterparts.

"Although AOL's international joint ventures have no impact on the U.S. profit and loss, we continue to believe that international represents a future wave of growth for the company," said Henry Blodget, an analyst at Merrill Lynch. "We therefore regard the new plan as a major positive for AOL."

The new plan will accelerate AOL's growth in the United Kingdom, increase monthly use, increase advertising and commerce revenue, and reclaim market share from free ISPs, he said.

The phone charge is the lowest ever daytime rate in the United Kingdom. Since fixed rates for Internet access were introduced in the United States, the average time AOL's U.S. users spend online has increased to about an hour each day from about 17 minutes in 1996.

Seventeen minutes is about the time AOL's U.K. users spend online. AOL hopes its new pricing will also increase the amount of time its U.K. users spend online.

AOL slipped to third spot in the U.K. Internet access market, set to be worth $1.9 billion by 2003. Freeserve, which is 80 percent owned by Dixons Group, the United Kingdom's largest electronics retailer, leads the market. It is followed by BT ClickFree, a free service owned by British Telecommunications, Britain's largest phone company.

Copyright 1999, Bloomberg L.P. All Rights Reserved.

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