AT&T snags AOL as WorldNet option

As anticipated, AT&T cut a deal with America Online today that will include the online service in AT&T's own Internet access package and may signal a major change in the way proprietary online services are offered.

The telecommunications behemoth, which announced its WorldNet dial-up Internet service last month, will offer AOL content as an additional option to WorldNet subscribers beginning in early summer, said Kevin Compton, an AT&T spokesperson.

Proprietary online services, such as AOL, CompuServe, and Prodigy, all charge hourly fees for accessing their own content and the Internet. AT&T's plan reverses that model, allowing WorldNet Internet users to select AOL content the way cable subscribers select Home Box Office and other premium channels as an option above and beyond the price of basic service.

The two companies did not reveal pricing for the AOL service, but customers can expect to receive its content for a "reduced rate," Compton said. AOL users currently pay $9.95 for five hours of access and $2.95 for each additional hour.

AT&T is reportedly also negotiating with CompuServe and Prodigy, but officials at the telecommunications giant would not comment on any other discussions.

WorldNet itself is scheduled to launch later this week, although AT&T officials acknowledged that some users will experience delays in getting the required access software because of enormous customer demand.

AT&T shook up the entire Internet access market by announcing last month that it will give away five free hours of access per month to its long-distance telephone customers and charge a $19.95 flat fee for unlimited access. The company has already signed up nearly 147,000 customers for WorldNet and answered more than 210,000 calls from customers.

AOL will continue to be offered as a standalone online service, separate from WorldNet, said AOL's CEO Steve Case. However, the deal with AT&T will allow the company to off-load some of its access business to AT&T just as Internet access is becoming increasingly competitive.

But some analysts are wondering how attractive the AOL option will be for WorldNet users, considering that they will still have to switch between their Web browser and AOL's proprietary client software.

"I'm still wondering what AOL has to offer AT&T subscribers," said Alan Weiner, principal analyst at Dataquest, based in San Jose, California. "It's a clunky marriage in which [subscribers] are going to have to go back to proprietary software when everyone's moving to the Internet."

Weiner speculated that the deal with AT&T may be preparation for AOL abandoning both its proprietary client software and the Internet backbone that it now maintains on its own. AOL also announced today that it is licensing Netscape Communication's Navigator Web browser for its more than 5 million subscribers.