ISPs not matching AOL increase--yet
America Online's Internet access competitors are not jumping on the rate-increase bandwagon yet, though some are considering it.
But other online services and Internet service providers were not yet rushing to cross over and match the $21.95 monthly prices planned by AOL for April.
Instead, many said they plan to hold the line on the standard $19.95 monthly rate, for now--but they are introducing higher-priced "premium" services as well to help bolster profitability. Other ISPs, such as MCI, actually are lowering prices to as low as $14.95 per month, with strings attached. Microsoft Network, AOL's biggest online competitor, declined comment today.
Many of AOL's rivals wasted no time in trying to lure potentially disgruntled AOL customers, a reminder of the industry's intensely competitive nature.
EarthLink Network, for example, today launched a campaign called "Get out of AOL for Free." It includes free email notification for users who switch over to EarthLink, similar to a forwarding address from the U.S. Postal Service, a spokeswoman said.
EarthLink originally planned to launch the "Get out of AOL" program about two weeks from now, but it was moved up based on AOL's pricing decision.
"Thank you, AOL," said EarthLink spokeswoman Kirsten Kappos. She predicted that AOL's price hikes will cause some of its subscribers to cancel, especially in light of the company's previous service problems.
EarthLink will continue charging $19.95 per month for unlimited Net access.
The ISP also charges $29.95 for a premium service called "TotalAccess Gold," but that includes priority technical support, an additional email account, and quarterly updates on Internet software. "If you're providing excellent service, I don't think raising prices is an issue," Kappos said.
Analysts agreed that other ISPs may gain subscribers as a result of today's announcement.
"Some people may be looking for a reason to leave AOL" because of previous service glitches and annoyances such as click-through ads, said Jill Frankle, an analyst with International Data Corporation. "The price increase is not going to be met by all the other players, and it will cause significant numbers within its customer base to look elsewhere."
Another ISP, MindSpring, said it would take a "wait and see" approach, but felt no immediate pressure to match AOL.
"It definitely brought smiles to a lot of faces of people at MindSpring," said MindSpring president Mike McQuary. "It puts us in the catbird's seat, because we're one of the few ISPs who have shown a profit [charging $19.95 per month].
"We don't feel we're compelled to react to a higher price," McQuary added. He didn't rule out the possibility of a price increase later, however. He said it largely depends on how customers react to AOL's planned price increases.
Mom-and-pop ISPs also saw a chance to benefit from AOL's rate hike.
"It does take off some pressure, and it makes us more competitive," said Shawn Champagne, spokesman for Louisville, Colorado-based ISP PrivateI, which provides its fewer than 1,000 users 60 hours of monthly access for $25 per month.
Andreas Glocker, chief executive of San Francisco-based ISP Sirius Connections, called the price increase good news for his company. "The possibilities for increasing our market share become a little better, because AOL is still the No. 1 competitor for small ISPs," he said. "And people are price-conscious when it comes to Internet access."
Glocker said AOL's move would not cause him to consider a price increase at Sirius, which offers unlimited access for $18.95 per month and has 14,000 subscribers.
AOL recently has been beefing up its proprietary content, such as a recent deal to carry material from the newly launched Teen People magazine. But many ISPs said they weren't threatened by AOL's moves, because more of the online service's content is appearing on the Web for free.
As today's news spread, some AOL customers already were threatening to switch to another ISP. "After more than five years with AOL, I've canceled my subscription in protest of the rate increase," one user said.
Some ISPs already have moved away from the standard $19.95 rate for Internet pricing, including CompuServe's online service, which now is owned by AOL, and charges $24.95 per month for unlimited Net access. CompuServe is being run as a separate business, but many analysts had wondered whether AOL would raise prices when it bought CompuServe.
MCI has lowered prices for its customers. It is offering a rate of $14.95 per month for customers who agreed to sign up for long distance phone service as well.
Internet News Editor Jeff Pelline contributed to this report.