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AOL Hikes Monthly Flat Fee

Service also lays off 500 CompuServe employees.

By Brian McWilliams, PCWorld   

CEO Steve Case announced the price change in a letter to members. Case justified the 10 percent increase, from $19.95 per month to $21.95, saying it will give AOL %dquotflexibility to continue investing in making AOL even better, and will enable us to cover the higher costs we%squotre experiencing due to higher usage.%dquot

Pricing for AOL%squots other access plans hasn%squott changed. But the price hike will affect nearly 75 percent of AOL%squots 11 million members.

Robert Seidman, publisher of Seidman%squots Online Insider, points out that AOL plans to announce recent financial results on Tuesday, and suggests that the price hike is a preview. He believes that ads and online purchases are not subsidizing AOL%squots costs. %dquotGiven where commerce and advertising are today, AOL%squots margins are either nil or very small and they%squotre betting that customers will take [the price hike] in stride.%dquot

Also on Monday, AOL announced layoffs at CompuServe, which it acquired last fall. The company said it is cutting 500 CompuServe employees, many of them in customer service. AOL is also scuttling development of the Web-based CompuServe service, which was to be called %dquotC.%dquot AOL said the change is part of an effort to revitalize CompuServe, which will culminate in the release of CompuServe 5.0, a new version of its proprietary client software.

For the two million current CompuServe subscribers, Seidman says the announcement shouldn%squott have any major impact.

%dquotWhen you take over something like [CompuServe], you want to hold on to the customers, you want to hold on to the revenues,%dquot Seidman says. %dquotSo at least what it suggests in the very near term is status quo.%dquot

Also under scrutiny at CompuServe is its Internet service provider, Sprynet. AOL said the sale of Sprynet is one of the options under consideration.