America OnLine chairman Steve Case was forced to write a letter of apology to his eight million subscribers last week explaining the company's inability to cope with surging demand.
AOL faces yet another lawsuit from disgruntled customers, who have filed class-action suits against the company in three separate states.
Thousands of AOL subscribers have been getting continuous busy signals since AOL introduced an unlimited usage plan in December.
Members were offered an option to pay $19.95 (#12) a month to stay on-line as long as they wanted. But the suits allege the company acted with "malice and fraud" because it did not beef-up its infrastructure sufficiently before putting the new pricing plan into operation.
This latest court battle adds to AOL's increasingly strained relations with its customer base, many of whom are still looking to resolve differences about its billing practices.
Jonathan Bulkeley, AOL's UK managing director, conceded there was an issue, but expressed surprise at the legal action the company now faces.
He admitted: "No, we haven't been able to keep up with demand. And yes, we're working on it."
AOL is spending $250 million enhancing its network, including the installation of 30,000 modems a month. The goal is to allow 400,000 simultaneous hits by 1 July, an increase of 150,000 over current capacity levels.
Bulkeley denied AOL had an image problem despite its numerous court appearances and his boss' letter of apology. He said: "The US is a very litigious environment, but we continue to be the leading on-line service and we're still growing."
The latest suit was filed just a day after AOL left court after trying to clear up allegations that it has been overcharging members. Bulkeley may deny the company has an image problem, but if the infrastructure is unable to cope word will spread that AOL is unreliable. Customers already unhappy with AOL's practices have set up several anti-AOL sites, a sure sign that the situation is in danger of deteriorating further. Bulkeley has agreed to an interview with PC Week to debate the company's predicament.
It will appear in February.
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