AOL UK is considering offering a free Internet service, similar to Dixon's Freeserve, to compliment its subscriber service.
The move comes as no surprise - AOL has been charging a monthly fee for its service in Europe, but has lost significant market share and its number one slot inb the UK to Freeserve.
AOL UK denied that an announcement is imminent, but admitted that it is looking at a variety of models including the so-called "free services model" as an addition to its subscription based AOL and Compuserve brands.
"If the free services model proves to be a viable niche market business then AOL UK, with its multiple brands is ideally positioned to successfully enter this niche," commented David Phillips, president and managing director of AOL UK.
The AOL free service rumours have come just as a report by UK analysts Fletcher Research maintains that Dixons Freeserve has turned the UK Internet service provider market upside down. It predicts that more changes are on the way as ISPs scrum for consumers.
The report forecasts that the number of consumers who pay for Internet access will plummet, whilst the number of households online will rocket to 7.5 million, making a total online population of 20 million.
Neil Bradford, a director of Fletcher Research, said, "Freeserve's compelling proposition and aggressive development has built a powerful online brand with formidable lead in the UK Internet access market. We do not expect any other brand to be able to match, let alone overtake, Freeserve's progress, unless a new business model for delivering access arrives, such as offering free phone calls or free PCs."
At the end of May, 31 per cent of home Internet users in the UK had an active Freeserve account, according to the report. UK consumers, however, are a fickle bunch, with the average Internet user having 1.3 active accounts. This shows that consumers have little loyalty to their ISPs and are happy to move around to get the best service, concluded the report.
Meanwhile America Online is making a $1.5 billion investment in Hughes Electronics, the creator of DirectTV, to provide high speed Internet access via satellite.
The deal will give AOL a high speed Internet access option and will also give a welcome push to AOL TV, the company's interactive TV product.
"It benefits American Online across all fronts and puts more pieces in place for the next wave of interactive services," said Steve Case, AOL's chairman and chief executive.
Last month AOL and Hughes agreed to jointly develop a set top box to enable DirectTV customers to subscribe to AOL's AOL TV interactive service that combines TV programming with Internet access.
"I don't think this precludes in any way, shape or form our ability to work with telephone companies or cable companies or anyone who can provide any piece of the puzzle of this broadband tapestry," Case said.
AOL already has partnerships with Bell Atlantic and SBC Communications to provide high speed Internet access over telephone lines in the US.
Satellite has come under criticism because it cannot deliver high speed data in both directions. Hughes, however, claims that its Spaceway system will solve the problem by providing two way data connections. Spaceway is not expected to go live until 2003.
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