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Week in review: AOL overhaul

The melding of old economy and new economy comes under renewed scrutiny as AOL Time Warner announces restructuring plans for its struggling online unit.

One of the more closely watched experiments in melding old economy and new economy came under renewed scrutiny as AOL Time Warner announced restructuring plans for its struggling online unit.

Already grappling with declining subscriber growth in its core dial-up business, the company said at its analyst meeting that it expects advertising and commerce revenue from its America Online division to fall 40 percent to 50 percent in 2003. The company maintained, however, that the decline will be offset by growth in subscriptions and that overall revenue will be flat.

America Online CEO Jonathan Miller, while meeting with his top managers, detailed the division's turnaround plans and hinted at layoffs as a way to cut costs. Miller said there were no "across the board" layoffs planned but that realignment of AOL's operations could result in some staff reductions, division by division.

Another facet of the plan will include restructuring agreements with major telephone carriers and its corporate cousin Time Warner Cable as part of an overall shift in its broadband ambitions. AOL is trying to strike deals with cable and phone companies to bundle AOL as a part of their broadband offerings. It will also promote its "Bring Your Own Access" plan, which charges $14.95 a month to people accessing the Internet from their own broadband provider.

The online division is also mulling new pricing plans that could foreshadow a price hike for its flagship service. Miller hinted at subscription charge changes in coming months--including a possible price increase for its flagship Net access service. The company currently charges $23.90 a month for unlimited dial-up access and $54.95 for its high-speed product, both among the priciest in the business.

Miller emphasized that the company has no immediate plans to tinker with prices, but did not rule out the possibility of a rate increase. "If we build value into the product, we can do that," he said. AOL is also looking "very seriously" at getting into the low-cost Internet access business.

Perhaps in hopes of giving the division a boost, America Online previewed the upcoming version 9.0 of its flagship AOL service, showing off an early rendition of the software that includes many new personalization and multimedia features.

Security alert
A security hole on Tower Records' Web site exposed data on millions of U.S. and U.K. customers. The glitch allowed anyone to peruse Tower Records' Web site to view its database of customer orders dating from 1996 through this week, including home and e-mail addresses, phone numbers and what music or video products were purchased. More than 3 million such records were exposed. No credit card numbers appear to have been revealed, the company said.

Microsoft warned of new security glitches in some of its Internet software that could expose sensitive data. One problem could allow hackers to pilfer information from computers running versions of its Internet Explorer Web browser. The Internet Explorer security hole affects versions 5.5 and 6 for Windows. IE 5.01 is not affected by the glitch.

A second problem, which strikes Microsoft's Outlook 2002 e-mail program, could let a hacker deny user access to the program. The company rated the security glitches as "moderate" threats but recommended all consumers apply patches to prevent hacker attacks.

While these warnings legitimately try to inform computer users of threats, some Web advertisements masquerade as pop-up "security alert" windows to hoodwink Net surfers into clicking to its site via the ads. A new class-action lawsuit that aims to rid the Internet of the deceptive banners is one of the first to bring public discontent over some type of Internet advertising to the courtroom. San Luis Obispo, Calif.-based Bonzi Software's "ad banners are disguised as something other than ad banners, and unwitting users see what they believe to be an alert issued by their computer and then respond," said the chairman of the group that brought the lawsuit.

Wi-Fi growth
How big is W-Fi getting? How about as big as Budweiser? A key figure for standards body the Wi-Fi Alliance says the wireless networking industry will surpass the revenue of household products such as Budweiser beer by 2006.

The chairman of the alliance said the wireless networking industry, which consists mostly of 802.11b-based products, is expected to bring in $2 billion in revenue this year. Those profits are expected to grow at a compounded rate of 30 percent through 2006, he said. By contrast, Budweiser this year is expected to bring in $5 billion.

Intel, IBM and AT&T officially threw their combined weight behind the effort to create a nationwide network of public "hot spots" that would give people wireless broadband Internet access from just about anywhere. Intel Capital, along with Big Blue, AT&T and investors Apax Partners and 3i, announced the creation of Cometa Networks, a new company focused on deploying hot spots throughout the United States.

Hot spots are public areas where people can access the Internet using products based on 802.11b, or Wi-Fi, a wireless networking standard with a range of about 300 feet from a network's access points, or radio transmitters. "Wi-Fi will bring (wireless) computing into the general public environment, leading to increased business productivity and new consumer applications," said Lawrence B. Brilliant, chief executive officer of Cometa.

Special focus: Tech crystal ball
Will wireless messaging technology erase the artificial boundaries that separate people and machines? Or will nonproprietary software one day elbow aside for-profit applications packages sold by the likes of Microsoft?

CNET assembled some of the best entrepreneurial and research minds in the technology industry to share their views on five rapidly evolving technology sectors: security, Web services, open source, personal technology and wireless communications. The 20 participants in this third installment of our Vision Series peer over the horizon and offer their views of these important areas.

Also of note
Macworld Expo/Tokyo has been canceled by the show's producer, which blamed that action on a lack of interest from exhibitors...A Chicago federal judge ordered file-swapping service Madster, formerly known as Aimster, to unplug its computers from the Internet in a last-ditch effort to prevent music piracy on its network...A federal grand jury indicted two men on criminal charges of stealing trade secrets from Sun Microsystems, Transmeta and other companies in order to make and sell processors based on the technology in China...As instant messaging makes inroads among companies that want to improve communications, the medium is also taking on another role: the bearer of corporate gossip.