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American Express toys with free ISP

The credit card company is quietly testing a new service that lets card members connect to the Web for free, an experiment that has failed for many other online businesses.

American Express is quietly testing a new service that lets cardholders connect to the Web for free, a costly experiment that has failed for many other online businesses.

The service, dubbed American Express Online, gives cardholders free, unlimited Internet access; all-hours customer service; and a Web-based e-mail account with the domain name "AmexOL.net." The service also lets members check their accounts securely, shop online and use various instant messaging services from an American Express-branded home page that is free of advertisements.

According to the American Express Online Web site, the service is available to "all American Express cardmembers" in the United States. The site says the company plans to offer a similar program to Canadian customers if the response to the service in the United States is good. The program is offered to Windows PC users only.

A spokeswoman from American Express said the company is testing the new service, although she said it has yet to finalize the program or announce it publicly. She said the company has so far limited participation to a small group of cardholders who were invited to join over the past few months.

"It's in a testing phase with a small group of current customers. We're still determining services and features that work," said Desiree Fish, who would not give further details.

The American Express Online trial comes as many dot-coms are abandoning giveaways of all kinds, a move driven largely by increased demands for profits.

Once-popular free Internet service providers have been hit especially hard. Among the failures, CMGI-backed AltaVista pulled its free Net service after its provider, 1stUp.com, shut down late last year.

Other well-heeled companies have pulled back on recently extended free Net-access offers. Kmart's online venture, BlueLight.com, which began offering consumers free online access almost a year ago, has started imposing restrictions to create a more economically advantageous service for the company, analysts say.

Analysts questioned whether American Express has fully evaluated the cost benefits of offering such a service.

"If American Express cannot tie new revenue streams directly to the free ISP service that will help it cover the costs...you might find that the company will pull back on this initiative," said Emily Meehan, senior analyst at The Yankee Group. "We used to think it was a way to lock in high-value customers, but over the long run it's costly because of all the customer service, general network costs and leasing lines."

Previously, American Express introduced such services as free online trading to draw members to the Web. But it began to charge for trades after too many people took advantage of the service, a source close to the company said.

American Express is best known for its flagship Green card and high-end Gold and Platinum cards. In a bid to catch up with rivals Visa and MasterCard, it has been courting fresh markets with new products, such as its Optima card, which comes with no monthly fee.

In 1999, the company began offering a Blue card, embedded with a computer chip for added security, aimed at Internet users. Last year, it began an online fraud protection program, offering onetime-use credit card numbers for Web users.

Word of the American Express Online program leaked out this week on EasyWebTV.com, a Web site that advertises freebies on the Net. The company posted a notice on its site saying that it has "partnered with American Express to help people to offer its site visitors easy access to sign up for the card and to download the Free ISP program."

Fish said American Express is not affiliated with EasyWebTV.com.