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AOL billing practices investigated

New York state authorities are reportedly investigating AOL's billing practices.

The New York state attorney general's office is eight weeks into an investigation of America Online's billing practices, but the probe isn't stopping the company from forging ahead with announcements of new technology, including the licensing of Macromedia's Shockwave.

According to a report in Newsday, the New York state attorney general's office has been investigating AOL's billing practices for the past eight weeks. "In essence, it revolves around how they break down the time that they charge for and whether it's fair," an unnamed source was quoted as saying in the report.

"It is our understanding that several state Attorneys General have informally inquired into industry practices, and AOL has had dialogue with the New York State Attorney General's office with regard to this informal inquiry," stated a prepared statement from AOL released this afternoon about the report. "We are also working closely with legislators and regulators in New York and many other states to increase consumer education and awareness on matters relating to consumer rights."

The news was badly timed for the market leader, which has embarked on a full-scale campaign to combat perceptions that it is being left behind as the only propriety online service while its main competitors open their content to the Web. CompuServe and Prodigy, respectively the second- and third-ranked online services, have made their move to the Internet, and AOL's stock has suffered as a result.

AOL stock dropped 10 percent June 5 after analyst reports predicted that subscriber rates would slow in the near future, from 53 points to 47-5/8. As of early afternoon, AOL shares are trading today at 47-3/8 after closing yesterday at 49-3/4.

The recent news that CEO Steve Case and seven other company officials sold off a total of 481,000 AOL shares compounded the speculation that AOL market value has peaked. Case reportedly sold $14 million in shares in May at an average of $51 each.

In the latest attempts to revitalize its offerings, AOL has been planning to unveil a major upgrade of its software for Windows users, with a comparable Mac upgrade coming in the fall. The service, with approximately 6 million subscribers, has also licensed Shockwave to allow AOL users with the Microsoft Internet Explorer browser to view animations created in Macromedia Director. Due to a deal signed in March with Microsoft, Internet Explorer is now the main browser included in every new version of AOL.

Microsoft earlier this month agreed to bundle Shockwave with its browser, but because AOL is offering its own flavor of Internet Explorer the online service had to negotiate a separate agreement with Macromedia, said Joseph Ansanelli, director of product management for Internet tools at Macromedia. AOL will use Shockwave to spruce up pages within its online service, as well as allowing AOL subscribers to browse Web sites with Shockwave movies, according to Ansanelli.

Under a second partnership announced this week, with financial software leader Intuit, the company will offer its BankNow online banking technology to AOL's Windows users beginning later this summer, allowing them to conduct secure online transactions with participating institutions, which are to be announced at a later date.

Related stories:
Upgrade of AOL software coming soon
AOL stock falls after negative reports
AOL the last of the online service breed
Microsoft juices up Shockwave
Director 5.0 to ship this month

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