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AT&T aims to snag ISP subscribers left in limbo

With a new advertising effort, AT&T WorldNet is attempting to capture Internet users who may have fled from the sputtering free ISPs or more costly traditional Net access providers.

With a new advertising effort, AT&T is aggressively attempting to capture Internet users who may have fled from the sputtering free ISPs or more costly traditional Net access providers.

The communications giant launched a television advertising campaign this week for its WorldNet service, which offers dial-up Internet for as little as $4.95 per month. But there is a catch: Customers must be willing to view a string of ever-present personalized advertisements.

The plan was launched quietly in July, at the same time many free ISPs were drawing in millions of customers. But AT&T has done little to tout the lower-cost ISP service--previously WorldNet cost $9.95 per month--until now.

The pricing puts AT&T squarely between the free ISPs, which have been criticized for their inconsistent service and incessant ads, and the larger dial-up ISPs, which typically charge consumers about $20 per month for ad-free Net access.

AT&T "may be out front with this type of campaign," said Jupiter Research analyst Joe Laszlo.

WorldNet also offers two other options, including prices at $14.95 and $21.95 per month. For that price consumers will avoid the targeted advertising and get more customer support. For $14.95, you get 150 hours, then have to pay 99 cents per extra hour plus pay more for a live agent to support you in times of crisis. For $21.95, you get unlimited hours and the live agent.

The $4.95 option marks the first time AT&T has offered an ad-supported ISP service, a spokeswoman said.

Ma Bell's timing could prove to be critical.

Many free ISPs are hurting financially as the advertising dollars they depended upon have begun to wither. Usually, many new computer users seek an Internet access service shortly after the holiday season. But PC sales actually slipped substantially in December.

In addition, the same softening advertising market that has hurt the free ISPs, such as BlueLight.com and NetZero, could affect AT&T.

"It's a good step, but it's not a cure," said Gary Jacobi, an analyst with investment banking firm Deutsche Banc Alex Brown.

With the new ads, AT&T also is competing for consumer attention with high-profile campaigns from Microsoft's MSN, America Online and EarthLink. While those competitors are stressing the reliability of their service, AT&T is the only one focusing on low cost, Laszlo said.

Scooping up any of the Web wanderers left without access because of free ISP failures could help AT&T lift its sagging numbers, analysts said. Last year, the WorldNet service actually lost subscribers, while more competitors continued to grow, Laszlo said.

There are an estimated 20 million free ISP customers, lead by NetZero and Juno Online Services. Companies such as AltaVista, 1stUp.com and Kmart's BlueLight either recently folded or scaled back service.

Even leader NetZero has started making some customers who surf more than 40 hours a month pay a monthly fee.