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CompuServe defections drive industry down

CompuServe loses a substantial number of customers in the last three months, according to a quarterly study on Internet usage.

CompuServe (CSRV) has lost a substantial number of customers in the last three months, according to a quarterly study on Internet usage by industry newsletter Interactive Services Report.

As 23 percent of CompuServe users abandoned the service, the top five consumer Internet service providers lost 4.9 percent of their customers in the third quarter, according to the report.

The "Big Five" included in the study were the following: America Online (AOL), CompuServe, Microsoft Network, Prodigy, and AT&T WorldNet.

Five largest consumer ISPs
Company Customers Growth since
June 30
America Online 9,000,000 3%
CompuServe 4,137,000 -23%
Microsoft Network 2,300,000 0%
Prodigy 990,000 1%
AT&T WorldNet 950,000 6%
Source: Interactive Services Report

CompuServe would not confirm or deny the accuracy of the study, but a spokesman did concede that the company was aware of significant losses.

As ISPs try to get a handle on total usage in order to prevent network outages and busy signals, market researchers have yet to come up with a standard method of measuring industry trends.

This study comes in contrast with others, including one this week by The Maloff Group, which reported that Internet access revenues as a whole have skyrocketed in the last year, growing at a rate of almost 25 percent per month. The Maloff Group measured annualized revenues, while the Interactive Services Report measured customer base.

Catherine Applefeld Olson, senior editor of the technology newsletter, believes that CompuServe's huge losses have a lot to do with its pending merger with America Online, announced in early September.

CompuServe and AOL have different types of subscribers, she noted. "CompuServe has more business users who are less interested in 'buddy lines' and chat. That doesn't make sense for them."

Executives at AOL and CompuServe have said that they will maintain CompuServe as a separate entity.

But Olson thinks that a large chunk of CompuServe members may have moved over to regional ISPs or may account for some of AOL's 3 percent increase in customers.

The news for the Internet access industry was not all bad, however. The study found that alternative access providers such as Microsoft's WebTV and cable modem providers such as @Home are making steady progress, showing huge jumps recently in their customer bases. WebTV grew 76 percent to 150,000 users, and @Home increased to 26,000 users, an almost 400 percent increase.

For the purposes of the study, the report did not include backbone providers such as UUNet or AGIS, nor did it count customers of regional ISPs.