Free AOL use sparks new worries

Free Internet access may be a bygone perk of the dot-com bubble, but it appears to be alive and well at the world's largest Internet service provider, America Online.

AOL offers a battery of free promotion and retention programs, but refuses to disclose how many of its subscribers pay nothing for the service. Now, Wall Street is zeroing in on some financial details that it believes offer a guide to this elusive number--and it doesn't like what it sees.

The worries over the freebie issue were sparked by a widening gap between the price of an AOL subscription and the average amount the company collects per subscriber. Although the service charges $23.90 a month--up from $21.95 after a price hike last year--average monthly subscription revenue per member has hovered between just $17 and $18, according to calculations provided by three Wall Street analysts, figures that are as much as 29 percent below the list price.

That doesn't mean that nearly 30 percent of all AOL members are using the service for free: The company has a number of pricing plans and distribution deals, which cut into its margins. But the size of the shortfall offers strong evidence that AOL's much-vaunted growth has increasingly become dependent on free sign-ups, analysts said.

News source: CNet News

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