AOL: Still the King?

Is AOL no longer the Internet service provider of choice for new Internet users?

A new study by Zona Research reports that AOL-once the default choice for new users who want to connect to the Internet-is losing its market share. According to the study, over the last eleven quarters, AOL's share of the top providers has fallen from almost six out of ten respondents to just more than four out of ten, with competition coming from local providers who are perhaps better equipped to provide handholding services to get people online.

This is not, however, considered a loss for AOL. As the report states, "In the past two and a half years, the total U.S. user population accessing the Web has grown substantially, from a level of some 30-35 million to nearly 80 million by our latest reckoning. This means that while AOL's share of market has slipped, its absolute base of customers has grown substantially."

Still Reigning

"We don't suggest at all that AOL is in trouble," says Zona's chief Internet economist Jack Staff. "Two and a half years ago there weren't as many players in this marketspace. Since that time, local ISPs have come on more strongly. Local ISPs can direct their marketing to a particular locale and provide the services that appeal to certain local users.

"AOL is still king in this area. It is better to have a smaller share of an emerging market than a bigger share of a smaller one," says Staff.

One such local provider is Teleport, a Portland, Oregon-based ISP with 41,000 subscribers. Spokesperson Jessica O'Neil says that many novice users switch to them from AOL "when they need an ISP that doesn't provide content."

"As more people become educated consumers, they realize there are other products and services available," she says.

Teleport, she adds, gets a healthy share of new users that may fall under AOL's domain. For these users the company offers three-hour classes, where customers can pay $40 and learn everything they need to go online.

"As Internet users raise their standards, they are willing to try new things," Staff says, comparing the change between Internet providers to the shift between long distance providers. People move from Sprint to MCI to AT&T and back again in search of the elusive better deal.

Driving Factors for Change

The biggest issue is speed. Staff says that more than a third of all users access the Internet at what is considered a "slow" speed; at 28.8 kilobits per second or below. If a consumer is working at this speed at a noticeable inconvenience, the idea of going faster-sometimes for less money-is appealing and can motivate a switch.

Mail is another issue. Each provider shift requires a corresponding change of e-mail addresses. This isn't always a drawback. With work accounts, users can usually log into their company mail server regardless of the ISP. "If you have a list of twenty people you talk to all the time it's not a major change," Staff says. "With a huge database of correspondents, it's another matter."

This is also one area where Web-based free e-mail services shine, as they are accessible from any provider. And some providers, like Teleport, will forward your mail for 30 days should you decide to discontinue its service.

Even with e-mail concerns, Staff says the tendency to move around isn't likely to change.

"It's the nature of who we are," Staff says. "We move around, we change jobs, we change ISPs and long-distance providers looking for the better angle."

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