High-speed AOL services finally emerge

After long delays, America Online has quietly begun offering its high-speed Internet service commercially in many major markets around the country and plans to launch a satellite-based version of the service Wednesday, sources say.

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A new service using Hughes Electronics' satellite DirecPC service will be available beginning Wednesday, sources said. At the same time, AOL has begun offering the digital subscriber line (DSL)-based "AOL Plus" service at Circuit City stores. The service is available in packages at Circuit City in areas served by either SBC Communications or Verizon Communications, the two local phone giants that AOL uses for high-speed connections. A similar promotion with Gateway retail stores is also in the works.

The DSL deals with the two phone companies were announced early in 1999, and the satellite relationship emerged in June of that year.

But the momentum behind the high-speed, or "broadband," initiatives then waned as the online company worked to make sure its mainstream service could avoid many of the bugs that have plagued the relatively immature broadband industry. The company also shifted much of its focus toward cable broadband access as a result of its pending merger with Time Warner.

The broadband service is a critical piece of AOL's overall strategy. With more than 25 million subscribers, AOL is the largest dial-up ISP in the world, but it has lacked a cohesive way to bring those customers high-speed services.

AOL has slowly been adding DSL markets since spring, and it is now available widely through the two telephone companies' service areas, a spokeswoman said. The connections have largely been marketed online through the AOL service itself.

"This is very significant for us," said Marta Grutka, an AOL spokeswoman. "This is another part of our philosophy of allowing customers to connect to us no matter how or when they want to."

The company still hasn't launched its trademark full-scale marketing blitz behind the service, however, perhaps in part because of worries about being able to fulfill customer demand. Waiting lists for ordinary DSL service in Verizon and SBC markets are still long, with customers often waiting several weeks or even months before seeing their service successfully installed.

In the year and a half since it began striking high-speed deals with telephone companies, broadband leader Excite@Home has climbed to a customer base of more than 2 million, even while being torn by repeated internal business crises. The local phone companies have collectively signed up more than 1 million DSL customers.

But in that year, AOL's strategy altered as a result of the company's planned merger with Time Warner, which operates one of the country's largest cable networks in addition to managing an entertainment powerhouse.

Once the most vocal proponent of allowing any ISP to tap into the high-speed cable Internet networks, AOL is now slated to become one of the largest cable Net providers in the business on its own. Regulators have expressed some concerns about AOL's control over the high-speed Net market and are now working to ensure that the Time Warner network also is available to competing ISPs.

The company has been testing both the telephone network and satellite-based high-speed services since early this year, but has not given an overall commercial release date for either.

New twist on DSL sales
AOL's new marketing strategy also brings a new twist to the DSL industry, marking the first time customers across the United States have been able to walk into a retail store and buy an add-on modem for their PC, a spokesman from Texas Instruments said. The retail modem for the DSL service is being sold by Actiontec Electronics using chips from Texas Instruments.

The Actiontec modem sells in a $149 internal PCI card and $169 external USB version. However, Circuit City is offering full rebates on the products when a customer agrees on a service commitment. Gateway also plans within a month to announce a deal to offer high-speed AOL service using the Actiontec DSL modem, although the PC seller has not finalized plans on where it will offer the service.

Typically, DSL modems come directly from the service provider and require a technician to install the equipment and prepare the phone line for DSL. More recently SBC and others have been offering self-installation kits, including the modems.

AOL does not have any ownership stake in the telephone companies that serve as the infrastructure providers for the DSL service. Last year it did invest $1.5 billion in Hughes Electronics, the parent company of DirecPC.

An AOL spokeswoman said that a "significant" number of AOL's subscribers were already using a high-speed connection, but declined to give specific numbers.