AOL to Provide High-Speed Web Access on East Coast

High-speed Internet access got a major boost Wednesday when America Online announced it would begin offering a broadband service to its customers on the East Coast this year.

AOL, by far the nation’s largest Internet access provider, said it would offer digital subscriber line technology for about $40 a month in partnership with New York phone giant Bell Atlantic.

America Online wouldn’t say when it might make a similar service available in California, but AOL President Bob Pittman made it clear that his company is negotiating more deals and is willing to partner with both phone and cable companies to bring high-speed access to its 15 million customers.

“We’ll be marketing it across the country,” Pittman said. “We’re open to working with all technologies.”

In addition to allowing graphics, sound, video and other data-intensive computer files to load more quickly, broadband connections are always turned on. That should be especially welcome news to AOL customers, who have often struggled with busy signals when they tried to connect to the network. Without the cumbersome dial-up process, users are expected to spend more time online.

Although high-speed Internet access over phone and cable lines has been on the market for more than a year in some areas, consumers have been slow to adopt it. The tepid response is due in part to confusion about the service.

AOL’s endorsement will speed the adoption rate, just as phone and cable companies are making the technology more widely available, analysts say. Pacific Bell, for instance, redoubled its efforts to sell digital subscriber line, or DSL, access just this week by expanding its service and cutting prices.

“Everyone agrees that if you can deliver speed at a reasonable price to consumers, they’re going to take it,” said Abishek Gami, an analyst with William Blair & Co. in Chicago. “This is an important juncture where AOL can take advantage of broadband and lead the charge.”

Bell Atlantic gives Dulles, Va.-based America Online coverage of about a quarter of the country, from Maine to Virginia. Gami said he expects AOL to strike a handful of similar deals before 1999 ends.

With coverage in an additional 20% of the country--including populous California and Texas--Pacific Bell parent SBC Communications would be another attractive partner for AOL. Both companies declined to say whether they have a deal in the works.

The DSL service AOL will offer with Bell Atlantic can handle 640 kilobits of data per second--about 11 times faster than a 56.6kbps modem. (Other flavors of DSL are up to 50 times faster.) Bell Atlantic expects the technology to be available to 7.5 million homes by the end of the year, rising to 14 million by year-end 2000.

An America Online spokeswoman wouldn’t say how many of those households the company expects to sign up. AOL currently has 4 million members in Bell Atlantic’s territory.

Prices for the high-speed service will be set closer to time of launch this summer. But AOL said the DSL upgrade would cost less than $20 more per month, plus as-yet-undetermined installation and equipment costs.

Including AOL’s regular $21.99 fee for unlimited access, the monthly cost for high-speed access would be less than $42. That is cheaper than Bell Atlantic’s own DSL offering, which costs $59.95, including Internet access. It is also cheaper than PacBell’s new package of Internet service with DSL, which starts at $49 per month.

The AOL service will compete with high-speed cable Internet services from @Home and Road Runner in Bell Atlantic territory. In other areas, AOL may partner with cable companies and compete against phone companies.

The offer should help AOL retain customers who are itching for faster service and might have switched to another service provider. Jeanne Hanley, a principal at Capital Reflections in North Gramby, Conn., said the service could help AOL attract new customers by bolstering its image as a technology-savvy company.

On the New York Stock Exchange Wednesday, America Online shares fell $7.88 to close at $145.75 while Bell Atlantic shares climbed $1.19 to close at $54.94.