AOL offers $299 deal on computer

AOL, the online division of Time Warner Inc., has been hemorrhaging subscribers. It has 2 million fewer than it had last year, leaving it with about 24.7 million. In this year’s third quarter, the company lost 688,000 customers.

The new promotion offers the low-cost PC, along with a color printer and monitor, to people who sign up for a one-year subscription to AOL’s Internet service at the full monthly price of $23.90.

”It’s kind of a last-ditch, desperate move for AOL to try to hold on to the dial-up subscribers,” said Ted Chamberlin, an analyst with Gartner Inc., a technology research firm. ”The more subscribers you lose, the worse you look to Wall Street. Everything hinges on that, and AOL is trying to make the inevitable a little slower.”

The pressure has increased on AOL from discount service providers such as United Online Inc., which offers dial-up Internet access for $9.95 a month through its NetZero, BlueLight and Juno brands.

Competitors such as EarthLink Inc. and Microsoft Corp.’s MSN service have also joined the price fight, offering new subscribers the first six months of service for about $10 a month — half the normal cost.

AOL is also ”losing a considerable amount of clients to broadband, especially to cable modems,” Chamberlin said. ”AOL really doesn’t have a legitimate broadband offering yet.”

Prices for high-speed access have been falling, with rates from some companies dipping below $30 a month.

The test promotion is available in some retail stores in a few Midwestern states, through direct mailings and at a special AOL Web site, said AOL spokesman Jim Whitney. The offer expires Dec. 31.

Whitney said the test began last summer for ”some people who called to cancel because they no longer had a working computer.” They were offered a similar deal that required a three-year contract.

AOL, based in Dulles, Va., and other Internet service providers promoted similar deals in the late 1990s, offering discounts on computers in exchange for service contracts.

AOL added 340,000 high-speed customers in the third quarter for a total of 2.6 million. Most of those people subscribe to AOL on top of an existing high-speed service from a company that provides a cable modem or a DSL connection over a phone line.

”Our focus and real resources have been behind the ‘bring your own [Net] access’ ” plan rather than directly selling broadband service, Whitney said.

The computer system AOL is offering for $299 is valued between $500 and $700, said Sean Aryai, marketing director for Systemax Inc., the Port Washington, N.Y.-based company providing the equipment.

With AOL paying the difference, the promotion is a sign of hard times for the company but great news for consumers, Chamberlin said.

”If more stuff like this happens, I think we’re going to reach a better saturation point for homes with PCs,” he said.

Source: The Atlanta Journal-Constitution