AOL faces high-speed struggles with DSL service

AOL is gearing up to launch its first broadband Net services over local phone networks later this year. But the company is treading cautiously into the market, slowing the introduction of services to ensure the high-speed technology is as easy to use as possible, an AOL spokeswoman said.

The company's moves into broadband are critical, as Internet consumers demand more speed, and competitors like Excite@Home dominate the cable-based high-speed Net market.

But analysts say AOL is taking a chance by associating itself with digital subscriber line (DSL) technology, which is difficult to install, not available everywhere, and rife with bugs.

"AOL stands for simple and easy to use," said Bruce Kasrel, an industry analyst with Forrester Communications. "If it's not, then they might as well forget it."

The danger is particularly keen in light of AOL's past subscriber struggles. When the company introduced unlimited service in late 1996, their user numbers swelled, overloading their networks and frustrating many customers. The episode spurred class-action suits, and gave the company a reputation it still has trouble shaking today.

DSL headaches
Although AOL won't be the first firm to introduce high-speed service, the Net access provider, with its more than 18 million subscribers, may ultimately be one of the primary paths for many people to be introduced to high-speed Net service, analysts say.

By the year 2003, Forrester Research estimates that more than 50 percent of DSL users across the nation--and possibly as much as 80 percent--will be AOL subscribers.

Digital subscriber line, which allows existing phone lines to be used simultaneously for high-speed Net and voice traffic, is the main competitor to cable modems. Excite@Home, the leading cable modem service, now claims more than 600,000 subscribers.

But DSL, like cable access, has had its share of growing pains as it has been slowly introduced to the market at large. The technology requires that subscribers live within three miles of a phone company office, or quality suffers--a barrier that the average dial-up AOL user has never dealt with.

Similarly, the systems are complicated to install, requiring hardware that goes well beyond a simple plug-in modem. Most companies still require a technician to visit a customer's house before turning on service--a process that could take several weeks to complete.

Even once the services are up and running, users often have to deal with network configuration issues that are more complicated than dial-up standards. Many of the phone companies' high-speed Internet service providers have suffered repeated outages, throwing many customers offline.

AOL's stamp
AOL has been working with Bell Atlantic and SBC Communications over the past few months to try to minimize the impact of these issues on its customers, Brackbill said. The first services are still slated to go live for consumers in late summer or early fall, she added.

The installation and configuration hurdles are of particular concern to AOL. They're working with their local phone partners to introduce a version of DSL that eliminates the need for a technician to visit. Instead, a consumer will be able to simply plug a small "filter" into any phone jack to set up the high-speed service.

"This eliminates a lot of the concern," Brackbill said. "People don't set time and record on their VCR for these kinds of reasons."

Bell Atlantic already uses this technology, but a Pacific Bell spokesman said his company didn't, citing concerns about the reliability of the filter technology.

AOL is more comfortable with what happens once the DSL service is already up and running. The company is developing a new version of its software, dubbed AOL Plus, that will automatically detect the speed of a user's connection to the Internet, and send broadband users more video, audio, and other content.

"We'll do what we always do and try to make the technology invisible," Brackbill said.

AOL's service in Bell Atlantic territory is currently in beta testing, and the company has yet to schedule a date for its commercial release. The SBC service is scheduled to go live later in the third quarter or early fourth quarter of this year. Other DSL services with Ameritech and GTE have also been announced.