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AOL expands private network

AOL signs a $340 million agreement with BBN to expand its dial-up network worldwide.

America Online (AOL) today struck a deal with BBN worth $340 million to expand the Internet service provider's dial-up network, both for AOL's proprietary online service and a private network aimed at businesses.

The four-year deal will help AOL expand its private networks with groups such as the New York Stock Exchange and Century 21, which use the service to send private email, not just for access to the online service. This is a growing part of the company's business and a key toward generating new revenue.

The contract also will allow AOL to provide faster, more reliable service to consumers. For example, the company will be able to expand the number of locations that consumers can reach with dial-up access, a spokeswoman said today. Too few locations can frustrate customers, especially those in rural areas, and can run up phone bills.

BBN will add at least 70,000 modems and related services per year under the agreement, which will significantly expand AOL's private TCP/IP dial-up network, called AOLnet.

Today's contract builds on a relationship that it has had with AOL since March 1995, when it began supplying the network's modems. BBN has helped AOLnet grow from a 10,000-modem system to a network of 170,000 modems in 700 cities.

AOL's expansion--the company said hourly usage of the network has doubled since last year--has prompted it to buy additional modems from BBN and rewrite the contract, said Peter Thonis, a BBN spokesman.

"We have been increasing the number of modems [delivered to AOL] over the course of the last year," Thonis said.

While AOL's network has seen a meteoric rise, the company's stock prices have been more volitile, hurt by Microsoft's and other phone companies' forays into the marketplace. AOL posted earnings of $29.8 million for the fiscal year ended June 30, up from a $35.7 million loss for the previous year.