A First For AOL

By Michael Hickins

May 04, 2006

AOL hopes its deal with Clearwire can help convert dial-up customers in areas where the wireless broadband provider operates.

In a move to help recover sagging revenues, AOL is stepping into new territory.

The company told internetnews.com that, for the first time, it has struck a deal with a wireless carrier to roll out a broadband service in the hopes of holding onto its dial-up customers as they migrate to broadband.

Modesto, Calif.-based Clearwire is the latest partner in a broadband initiative that AOL announced earlier this year that already includes Bell South, Verizon and Time Warner Cable.

The service, AOL High Speed -- Powered by Clearwire, will include live help available 24 hours per day via phone, e-mail, and instant messenger; a suite of antivirus and spyware protection solutions; unlimited e-mail and photo storage on AOL; and original programming, including commercial-free radio, streaming video, and music.

Joe Redling, president of AOL's access business, said wireless broadband is "a promising feature for new customer segments."

Redling positioned the wireless aspect of the deal as an "innovative approach to broadband access [offering] consumers additional levels of freedom and flexibility in how and where they experience AOL's content and services." That wireless broadband promise is key to the company's future. Merrill Lynch analyst Jessica Reif Cohen expressed concerns "about the long-term health of the business" in a research note published today.

And JupiterResearch analyst Joe Laszlo said AOL is looking to counter erosion in its dial-up segment, as its core customer base moves away from what was once referred to as training wheels for the Internet to high-speed connectivity.

Although Clearwire doesn't represent a very large footprint, said Laszlo, the deal is a step in the right direction.

"They focus mainly on smaller cities," Laszlo said of Clearwire. "But with each provider deal, AOL ensures it can offer broadband to more and more of its base of dial-up subscribers. So every deal helps."

The company confirmed that it is, "currently targeting existing AOL members who are eligible for the service in the four markets where the ... service is initially available."

Service will be available in Daytona Beach, Fla., and Jacksonville, Fla., as well as Modesto, Calif., and Stockton, Calif.

The service will cost $25.90 per month, which is surprising, given that this is the same as it charges for standard wired broadband.

But Laszlo told internetnews.com that "pricing will matter a lot" if the company is to get the level of conversions it is hoping for.



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