America Online has been forced to backtrack on a controversial flat-rate pricing scheme less than a week after announcing it. The embarrassing move follows complaints from customers and suggestions of unfair trade practices from attorney generals in 19 states across the US.
Until 1 December, AOL had charged subscribers an initial $9.95 (#6) for five hours usage and then $2.95 (#1.75) an hour after that. At the start of this month, the company automatically switched its seven million customers to a new, flat-fee price of $19.95 (#12) a month for unlimited usage.
Customers complained they had not been given adequate warning of the changes and that the new pricing effectively penalised low-volume users.
The pricing strategy also attracted the attention of US state officials who believed the automatic switch could violate consumer protection laws.
Officials in Washington took action two weeks ago, before the tariffs were introduced, to force AOL to adopt better billing disclosure practices and offer customers a chance to opt out of the flat-rate scheme if they wished. Washington subscribers can also receive a refund if they inform AOL by 31 March 1997 that they want to revert to a lower-priced scheme.
The Washington agreement has been used as the basis for a nationwide set of price revisions agreed on 5 December, following the intervention by 19 state attorney generals, including those from New York, Florida, Texas and Illinois.
Under the terms of the national agreement, AOL will display a message informing customers of the flat-rate pricing whenever they log on or off the service. Anyone who rejects this has until 10 April next year to tell AOL to reverse the December switch and receive a refund of the price difference.
A new payment category is also being introduced, billing customers with existing Internet connections at a rate of $9.95 for unlimited AOL access and three hours of service a month for $4.95, additional time will cost $2.50 an hour. The agreement also commits AOL to provide the 19 attorney generals detailed monthly reports of the number of subscribers requesting credits and refunds for the next six months
A spokesman for the New York State attorney general's office said: "The agreement holds the company responsible for clearly asking users whether they want the new plan. The intention previously was to convert users to the new pricing structure irrespective of how they may or may not have heard about it."
AOL denies any wrongdoing and has stated: "We are really bending over backwards to make (customers) aware of their choices."
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