Almost a year late, AOL (dossier) responded yesterday to the wave of free Internet-access providers who have been eating its lunch in Britain. The company is offering a low-end access service there branded with the Netscape name to avoid cannibalizing its paid services.
On this side of the pond, only the New York Times picked up the story, and the Times' man in London, Andrew Ross Sorkin, turned in a fine performance against the local rags, the Times of London and the Financial Times. Sorkin is the only reporter to remind us that three months ago AOL questioned whether Britain's free-subscription business was even sustainable. And he alone pointed out that part of the revenue obtained by Freeserve and its hundreds of imitators flows from a cut of the phone company's per-minute charges, as well as from advertising and electronic commerce.
But leave it to the British reporters to convey more of the local flavour. Both on-the-spot papers mentioned AOL Europe's distribution agreement with Kingfishers, who will pass out AOL CD-ROMs at 800 Woolworth outlets on the high street (a colorful Britishism for what the Yanks would more boringly call "the mass market"). The Times of London noted in a brief story that Freeserve's parent Dixons is an electrical retail group. (Sorkin identified it only as a "retailing chain.")
In the Financial Times, Christopher Price got a coherent quote from Andreas Schmidt, AOL Europe's chief, saying that the company's strategy is to complement the telephony policies in each country. Price was the only reporter to note that AOL had cut its prices for online access last April, a move which gained it nothing at all after Freeserve's market entry had "wrongfooted" AOL. Gotta love that Britspeak.
The news of AOL's low-cost service came on the heels of an announcement by Bertelsmann (dossier) (a partner in AOL Europe) that it recently sold half of its stake in AOL, leaving it with 0.7 percent of total shares. The Wall Street Journal's Nick Wingfield surmised that the sell-off was due to Bertelsmann's itchiness to go its own way on the Net, and wasn't pegged to any woes at AOL. But Paul Elliott, an analyst at First Call-Thomson Financial told Wingfield he wasn't so sure: "It's hardly ever a positive to see a large shareholder sell half of its position," Elliott said.
AOL Europe Launches Free Internet Service in Britain
New York Times
AOL Challenges Freeserve With Free Netscape Online
AOL Launches Own Free U.K. Internet Access
Bertelsmann Sells Half of Stake It Had Held in America Online
Wall Street Journal