AOL IN HIGH-STAKES MOVE PITCHES $15 SERVICE TO BROADBAND SUBSCRIBERS

Internet service giant America Online has long argued that thereason it has attracted 25 million US subscribers is because of itscompelling content and services, not just a reliable nationwide dial-up network for getting e-mail and sending instant messages.

Now AOL is about to expose that boast to a high-stakes test in themarketplace, as it rolls out a bid to get broadband subscribers ofother Net providers to agree to shell out an extra $15 a month foraccess to AOL communications, information, and shopping services, aswell as some special features like music and video from AOL's TimeWarner counterparts.

Cable modems and digital subscriber line systems are eating awayat the once steady growth in AOL's core dial-up franchise. So AOLTime Warner last week unveiled its strategy to clamber onto abroadband train that is picking up steam and threatening to leavebehind the company that first popularized the Net for the US market.

The growing broadband threat to subscriber counts comes as AOLalso warned last week that its advertising and e-commerce revenuescould plunge by 40 to 50 percent next year.

At the same time, rival Web giants are forming broadband alliancesof their own that will offer many of the features AOL is touting,including MSN with Verizon Communications, and Qwest and Yahoo withSBC Communications.

Besides boosting efforts to resell broadband AOL through providerssuch as Covad and Comcast, AOL is also trying to keep some of therevenues when its current $24-a-month dial-up customers migrate to$40 and $50 cable broadband and DSL packages, through a $14.95package of AOL features and services.

"Would it be better if we did some of this earlier? Yes," AOLchairman Stephen M. Case told reporters after a meeting with analystsin New York. "But we are where we are, and we are going to moveforward."

Besides having an AOL e-mail address and instant messaging, andaccess to its "walled garden" of media content and shopping,broadband subscribers to the $15 monthly package would next year beoffered some special services.

They would include music and video clips from Time Warner musicand entertainment divisions, online access to CNN TV broadcasts thatare now sold separately for $5 a month, easier systems to sharedigital photographs and home video with other users, and access topremium versions of the McAfee computer virus scanning software toprotect users' home PCs.

While more details of what the $15 package could include will comeout over the next several weeks, the immediate question many analystshad was how many subscribers already paying $50 a month for broadbandNet access would find AOL's offerings worth paying another 30 percentpremium, especially in a weak economy.

Charles Hoffman, chief executive of Covad Communications, whichhas signed a deal to begin providing wholesale DSL access for AOL inBoston and other US markets this winter, said he thinks AOL's shifttoward having more of its subscribers use outsourced broadbandconnections instead of AOL-managed dial-up connections "makes perfectsense."

But reacting to the $15 broadband services package, Hoffman said:"I personally think that their price may be a little high, but Iguess the market will tell us. . . . The better the content, the morepeople adopt broadband."

Jeff Chester of the Center for Digital Democracy, a Washingtongroup that opposes big media consolidations, said he believes AOL'spolicy is ironically being driven by the lack of "open access"requirements for cable modem networks that Time Warner strenuouslylobbied against becoming conditions of the $165 billion AOL TimeWarner merger two years ago.

Because AOL is having such a hard time getting access to cablesystems as an Internet service provider, Chester said, it is forcedto cast about for ways to keep at least some revenues coming in whenits customers defect to cable broadband, which accounts for about two-thirds of all new broadband growth.

"They have to re structure how they do business if they are goingto survive, given the policy choices they have helped create,"Chester said.

Jonathan Miller, who was picked as the AOL division's chiefexecutive in August, said: "AOL is a business in transition. We don'tpretend to have all the answers."

And AOL vice chairman Ted Leonsis put it even more plaintively:"We are a humbled company. We want our members to love us and need usonce again."

Peter J. Howe can be reached at howe@globe.com.