In my daily e-mail newsletter today, I was struck by the appearance of the following tech news headline:

US Internet access charges could rise

Curious as to how I could have missed news of this unexpected bit of federal legislation, I clicked on it and was taken to the ZDNet UK Web site, where I saw the sub-headline:

One downside of the AOL/Time Warner merger could be higher prices warn analysts

Argh! From AOL novices I would expect this sort of thing, but not from a major tech news house. Surely the entire United Kingdom isn't so naive about the name "America OnLine" that they think AOL is the only way we can get Internet access any longer?

AOL is not the Internet, although they do have an awful lot of influence. mblase complains that AOL raising prices does not mean that "US Internet access charges could rise," but the sad fact is that it has already happened. When AOL raised their unlimited rate from $19.95 to $21.95 per month, there was a great buzz about how this would cause AOL users to leave the service in droves. Analysts, in their infinite wisdom, claimed that this was the beginning of the end of America Online.

They were wrong.

AOL is just as strong as ever. In fact, their major competitors learned that AOL has the power to effectively raise the standard rate for national dial-up Internet service. MSN charges $21.95 per month. AT&T Worldnet used to charge $21.95 per month for unlimited service, but now they have discounted their rate to $16.95 a month and proclaimed that they're that much cheaper than AOL. Now that AOL has raised their price to $23.90 per month, it's likely that its competitors will do the same after a few months.

AOL, despite having one of the worst records for customer service (most of the folks I talk to hate the service with a passion) in the industry, has a loyal userbase. Why? Fear. AOL is the only ISP that many folks have ever known. Take away the friendly MDI front-end, and people don't know where to go. There's no big colorful "Write" button to send mail, no nice man to proclaim that they have mail, no list of channels to tell them what to view. Granted, most ISPs have their own web-based portal to handle these things, but it's too different from AOL for the transition to be smooth. Bear in mind that some AOL subscribers still rely on their AOL For Dummies book to help them check their e-mail. Are other ISP's really ready to handle the flood of calls from such uninitiated newbies?

AOL has a lot of leverage on-line, too. Their decision to go with Internet Explorer as their web browser means that people can write standards-compliant HTML without too much difficulty. However, if in AOL 8.0 (IE is already confirmed for the 7.0 release) they go with a Gecko-based solution, then you'll have 30 million users slowly migrating to a different rendering engine. AOL is in the unlikely position of being able to twist Microsoft's arm in that sense.

Bear in mind, noders: AOL is not the Internet, but it is a significant cross-section of it.

kto9: Perhaps you've forgotten that when AOL became AOL Time Warner, they acquired one of the largest cable systems in the U.S. All Time Warner Cable and RoadRunner subscribers are effectively AOL users now. Dial-up users in selected markets are now receiving pitches for AOL Plus or AOL for Broadband, basically the same interface on top of a cable, DSL or satellite connection.

generic-man makes some valid points, but they are mostly irrelevant. AOL is not the internet. It is a large dial-up provider (ISP). Yes, they can greatly influence prices on the dial-up side of the internet, but is that business viable in the long run?

I'd say, no. I was a charter subscriber to AOL -- switching over from GEnie (god knows how many years ago). I still have a letter from Steve Case begging me to return after I cancelled my account and returned to GEnie. In it I was promised a lifetime guarantee that my rate would never exceed $2.95/hour. What a deal I passed up.

So, GEnie and Prodigy and hundreds of other ISP's have bitten the dust. We can officially proclaim AOL the winner. Well, before Henry Ford started mass-producing automobiles there was a number one horse-drawn carriage maker somewhere in the world. And some of us remember a time when you could buy turntables to play vinyl records. Hell, some of us still own turntables and vinyl records.

My point is, AOHell is probably on the verge of being that carriage maker. Broadband internet access will jump up one of these days and bite them. And as older, less computer oriented users are replaced with younger more savvy users their subscribe base will eventually decline. These two factors will be difficult for AOL to cope with.

AOL then has to compete by charging for content. I just don't see anyone making money doing that except for some sex sites. Anyone that has followed Lucent Technologies the last year can tell you how steep the slope can be; riding on top of the world one year and junk bond status less than twelve months later.

Raising prices just brings that day closer. Each price increase makes cable and DSL more attractive.

AOL has won the dial-up ISP battle, but the internet is not dial-up ISP's. The internet is not AOL. AOL is a carriage maker; they've won the battle, but I don't see how they can win the war.

I have been a subscriber to Roadrunner for nearly two years. My $40 a month does not help AOL one bit. Nor in any sense am I an AOL subscriber. GEnie was once a part of GE, GEnie no longer exists, but GE does. In the longterm, AOL as a part, or significant part, of TimeWarner is not a given.

Here we are in 2009 and it turns out that AOL is not the internet. AOL's subscriber base is down over 70% since 2001 while overall internet subscriptions have nearly doubled in the same time period. Portions of AOL's overseas ISP operations have been sold off, and their US ISP operation might go the same way. AOL can't compete with Google in the ad space, and to say that they're competitive with Yahoo in the portal space is no great compliment. Despite their association with the remnants of Time-Warner (which no longer owns Time Warner Cable, Warner Music Group, or Time Warner Books), AOL can hardly be considered a heavyweight in any field anymore.

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