America Online Inc’s switch to its new flat-rate subscriber plan (CI No 3,031) looks set to squeeze the company’s already threatened margins, reports Network Briefing. Last month America Online bowed to pressure from US state regulators and agreed with Washington State to make its new pricing options clearer. And it has since been forced to […]
America Online Inc’s switch to its new flat-rate subscriber plan (CI No 3,031) looks set to squeeze the company’s already threatened margins, reports Network Briefing. Last month America Online bowed to pressure from US state regulators and agreed with Washington State to make its new pricing options clearer. And it has since been forced to go further with the remaining attorney generals of 19 US states. The company had announced its intention to switch its 7 million members to a new monthly $20 flat fee, rather than the previous $10 for five hours plus $3 for each additional hour. It is not the pricing itself that is causing concern, as it will actually save many AOL customers money, but the imposition of the model unless the customer specifically requests the alternative plan, priced at $5 per month for three hours with each additional hour at $2.50 each. State officials claimed this constituted unfair trading practices, through charging customers for goods and services which they had not explicitly asked for. However, under the agreement with Washington State, AOL members logging on to the service will only be able to proceed after choosing either the new pricing plan or other options. Microsoft and Prodigy both introduced similar pricing models just ahead of AOL, but did not face such opposition. Now AOL has agreed to automatic refunds to subscribers who do not want to pay the new flat rate. In addition, subscribers will be given a choice of rate plans rather than automatically being switched to them. Those customers who were automatically switched to the new plan on December 1 will be able to change back to the original plan any time up to April 10 with a refund of the difference. The company also agreed to give users more time and information to state their preference – an electronic message when they log on and off of the service as well as sending mailings to their homes. Switching all of its users over to the new rate automatically should have limited the effect on the company’s margins, but the new agreements are likely to create greater overheads for America Online, which took a hit of $385m as part of its restructuring. The new agreement requires AOL to provide written compliance reports detailing the number of members requesting credits and refunds every month for the next six months to each of the 19 attorney generals.