Aol Continues To Add Members Company Defends Practice Despite Bottlenecks
America Online Inc. continues to routinely sign up new subscribers - fueling allegations the on-line service is aggravating network bottlenecks it vowed to unclog.
The company defends the practice, saying it has capped membership at roughly 8 million and uses new signups to offset cancellations. Although he declined to provide specific numbers, AOL Chief Executive Steve Case said Tuesday that more people have been canceling since the recent troubles escalated.
But some critics wonder why America Online doesn’t take the extra step to ease demand on its network, which has been swamped with customers who paid $19.95 a month for unlimited on-line time but frequently get nothing but busy signals. Under pressure from attorneys general from around the country, AOL agreed two weeks ago to give frustrated customers refunds and credits as well as make it easier to drop the service.
Last week, a judge in Seattle temporarily barred America Online from signing up new customers in Washington state until it upgrades its system. The restraining order, spurred by a class-action lawsuit against AOL, was overturned by another judge on Monday.
“By continuing to take in other customers’ money, they are exacerbating the damage they are doing to their current customers,” said Seattle lawyer Steve Berman, whose case is among roughly 20 class-action suits facing AOL around the nation.
While AOL told states’ attorneys general it would stop soliciting new customers this month by suspending its advertising campaign, it did not agree to refrain from signing up anyone who inquires. Meanwhile, many people say they continue to receive company promotions in the mail.
Case, in an interview with The Associated Press, said that the AOL diskettes arriving in peoples’ homes this month were just leftovers from a marketing blitz the company has suspended.
“Most of the things we have in the pipeline would be problematic to unwind,” Case said. As far as refraining from adding any new customers for now, he added: “We don’t think completely shutting down is the answer.”
More broadly, the issue reflects the beleaguered company’s attempt to balance conflicting demands of Cyberspace commerce: Soothing customers’ frustrations while preserving its large subscriber base so important to attracting online advertisers.
America Online is staking its future profits on a substantial increase in ad revenues, which grew from nothing two years ago to about 10 percent of revenues today.
Its unlimited pricing plan, introduced in December, curbed revenues from subscribers even as on-line usage nearly tripled to 4.3 million online hours - driving up AOL’s costs for on-line access across telephone lines.
On Monday, AOL hired three of the advertising industry’s top salespeople and said it planned to double its ad sales staff. Commitments to advertisers make it tough for AOL to turn away prospective subscribers.
“We’re basically focused on selling our service at cost and making our profit through advertising and transactions,” Case said.
As for the current network bottlenecks, AOL believes that advertisers aren’t worried about customer frustrations because they will be ironed out as the company adds new modems to increase network capacity.
“When the history books are written about AOL 20 years from now, this period will be a relatively modest chapter in a much more significant overall story,” Case said.