Excite@Home to subsidize AOL members who sign up

Some of the broadband Net-access provider's cable partners offer to subsidize the cost of America Online for new users of the high-speed Net-over-cable service.

4 min read
In what may be a sign of broadband pricing battles to come, Excite@Home's cable partners are offering a limited promotional campaign under which some of them will subsidize the cost of America Online for new users of the high-speed Net-over-cable service.

Cable operators AT&T and Cox Communications have reduced the cost of their high-speed Excite@Home Internet access service for new users for several months, according to Excite@Home executives and spokespersons for the cable companies.

Although other operators are considering the offer, not all of Excite@Home's 21 cable partners offer the promotion, and specific details vary between operators. In addition, cable modem-based service, like other broadband offerings, is available only in select markets across the country.

The rate cutbacks are intended to allow new customers of Excite@Home's high-speed service to retain their AOL accounts while they try out @Home--without paying more money. The plan effectively subsidizes the cost of AOL.

The move, born out of research that showed Net users are reluctant to change email addresses, is an attempt to boost Excite@Home's subscriber rolls by enticing some of AOL's nearly 18 million customers to switch to the broadband service. Excite@Home has more than 600,000 subscribers, according to executives.

"Keep AOL, use our broadband service, and after you use it you're not going to want to go back," said David Pine, general counsel for Excite@Home.

AOL, normally priced at $21.95 per month for users of its dial-up modem pool, costs $9.95 for users who access the content service using an existing Internet connection. The lower rate is commonly called the "Bring your own access" plan. As such, the cable companies have reduced the monthly @Home fees by $9.95; @Home service typically costs about $40 a month.

AT&T Broadband & Internet Services, Ma Bell's cable unit, began the campaign July 5, according to spokeswoman LaRae Marsik. Under the promotional campaign, which AT&T is calling "You get, you keep, we pay," the company will reduce its TCI@Home rates by $9.95 through the end of the year for all new customers who sign up prior to August 31.

"They can keep what they like most [about AOL], their email address and other features, without a long-term risk," Marsik said. "If we can make it easier or more compelling for users to try our service we will."

AT&T is selectively targeting customers via direct mail to manage demand for the service, so not all potential users have been made aware of the offer yet.

Cox also is implementing the new promotion in its cable modem-ready cable systems, according to the company.

"We're recognizing that AOL does have a large subscriber base, and that people like their service and want to keep their Buddy Lists and things like that. But they want a faster connection and this gives them that opportunity," said Phil Weintraut, a marketing specialist for Cox@Home.

Cox, which calls its promotion "Make your AOL really fly," will reduce the monthly rate for new Cox@Home users by $9.95 a month for up to three months, Weintraut said. The cable company is attempting to limit the offer to users from the aol.com domain, he said.

Cox first began the promotion June 1 but "just a handful" of customers have taken advantage of the offer so far, Weintraut said. Cox has not yet aggressively marketed the new campaign, but is considering paid newspaper advertisements, he said.

The cable operators' offer is not the first time competing ISPs have tried to wrest customers from the online leader. US Internet and EarthLink Network attempted to attract AOL customers last year when the No. 1 ISP raised its monthly rates.

The @Home marketing move also could serve to bolster the cable industry's position on the controversial issue of opening cable Internet systems to competition. The so-called open access issue has become a heated topic in cable and regulatory circles in the past year.

Excite@Home claims that cable networks are open to unaffiliated Internet service providers, and therefore don't need regulatory interference, because @Home users can easily access third-party content such as AOL's. Excite@Home and AT&T, its largest shareholder, are hoping to avoid open access requirements, which would force cable operators to allow third-party ISPs to use their wires.

"This campaign serves a couple purposes," AT&T's Marsik said. "This allows us to reach out to additional customers to further our business and it is a demonstration that customers don't have to choose one or the other."