In an effort to undercut the rapidly growing ISP market, America Online is close to adopting a plan to offer unlimited Internet access to its customers for a flat rate and then charging extra for its proprietary content.
AOL executives are still working on the plan. But sources say they expect the new pricing scheme to be announced later this month. The change is intended to reduce the customer turnover, or "churn," focusing users on AOL's advantages over other ISPs such as its proprietary content, and continue to grow its associated online advertising revenue.
A spokesman for AOL, the nation's largest online service, declined comment.
AOL now has two pricing plans: $9.95 for five free hours, plus $2.95 for each additional hour; or $19.95 for 20 free hours, plus $2.95 for each additional hour.
Most ISPs, including AT&T, MCI, and Sprint, now charge $19.95 per month for unlimited Net access. AOL could charge the same amount or even slightly less and still make it a profitable strategy, the sources said.
But the success of the flat-rate pricing counts on customers choosing to pay extra for the proprietary content--a likely prospect, according to customer surveys. AOL is a leader in offering a wide variety of proprietary information such as online news, weather, sports, local city guides, and chat rooms to a mass audience on the Net.
The proprietary content also gives AOL a bigger stream of advertising revenue than the ISPs, which makes a flat-rate pricing strategy less risky. The company recently said that its ad revenues are actually on the rise. AOL also hopes to boost revenues by selling retail merchandise online.