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AOL Broadband Push

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Live concert webcasts exemplify AOL’s big move into broadband:

    With the thunderous beat of the Foo Fighters shaking the bar stools at the Black Cat club in Washington, the band’s lead singer, Dave Grohl, told hundreds jamming the stage that their reach extended all the way through cyberspace.

    “Hey, man,” Grohl shrieked into the microphone. “I’m live on A-O-L.”

    Actually, the Foo Fighters were live only to a small segment of America Online’s massive subscriber base, those who access the Internet through high-speed “broadband” connections. Only a single song was offered as a teaser to America Online’s 20 million-plus dial-up users. The idea was to give something extra to those who pay for speedy connections. Broadband subscribers tuned in to the live broadcast or a taped version about 250,000 times over a two-day period.

    The event at the Black Cat last week showed how the emphasis on broadband inside America Online has moved from the sidelines, with only eight employees a year ago, to become the centerpiece of the Northern Virginia-based firm’s business strategy and marketing campaign.

    ….Although America Online remains the nation’s biggest Internet service, with more than 20 million subscribers, it lost more than 500,000 dial-up subscribers in the first quarter alone, mostly to cable and telephone companies that sell high-speed Internet access. Nearly all of AOL’s customers use dial-up connections, making the company extremely vulnerable to powerful market forces. So far, AOL says only 3 million of its subscribers use broadband regularly.

    Forrester Research Inc. estimates that the high-speed market, with about 16 million households, is growing at a rate of 50 percent a year. These customers are migrating from dial-up, which for now is still used by three-quarters of the households that have Internet access.

    Jed Kolko, an analyst at Forrester Research, said the dramatic shift at AOL is a belated response to the movement of computer users to broadband, which has been occurring for a few years. AOL failed to move sooner, Kolko said, because it wanted to hold onto its more profitable dial-up business for as long as possible and not accelerate the migration to broadband.

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