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. Last Updated: 07/27/2016

Moscow Woes the Least Of AOL's New Troubles

Last month, America Online shut down its direct access numbers in Moscow because it was losing too much money to credit card fraudsters. Until mid-December, America Online users in Russia had been able to log into the U.S.-based AOL host directly using numbers provided by SprintNet and Globalnet. However, since so many Russia-based users were logging into AOL with fake credit card numbers, SprintNet and Globalnet were billing AOL much more than the company was earning in payments from users.


There is no great catastrophe here for people desperate to use AOL. The service is still accessible in Russia. It is possible -- and indeed much cheaper -- to open an account with another Moscow service provider who will then be able to help you connect to AOL (or Compuserve) via the Internet. Logging into AOL this way works out to be more than twice as cheap as using the numbers that have been closed. That is, of course, if you can get on at all: It is no real coincidence that this problem should happen to AOL now. There is a horrible logic in business that once troubles begin to hit you, they come in droves.


AOL subscribers in Russia may have more problems connecting, but hundreds of thousands of U.S. subscribers also have plenty to complain about at the moment. So much so that there is now probably a special waiting room for lawyers at the Virginia-based company.


In December, AOL changed the way it bills its customers to the super-cheap price offered by many U.S. Internet service providers. For a fixed $19.95 per month, an AOL subscriber now gets unlimited online time.


As a result, around the time the Russian access numbers were cut off, AOL attracted around 500,000 new subscribers. Unfortunately, if you offer people "all you can eat for $19.95" they tend to eat more. Access numbers have been continuously busy and the service has been clearly breaking up under pressure from a massive increase in usage. Recently, AOL's electronic mail temporarily stopped working, and 8 million subscribers couldn't access their mail for a brief period.


Subscribers are complaining that they can't even cancel their America Online accounts, because the toll-free 1-800 numbers are continuously busy. They say if they send electronic mail messages asking to cancel subscriptions, they are told to call one of those unreachable 1-800 numbers.


AOL was pushed to take this very risky course because it was being put under huge pressure by Internet service providers charging $20 per month. It is easy and not particularly expensive to set up a small Internet connection company. Though I doubt it is very profitable to connect subscribers at this price, the market is highly competitive. Other much larger telecommunications companies, like AT&T, have also adopted this pricing model.


AOL grew at a time when there were no Internet service providers to speak of, and it was providing people with a simple, easy-to-use way of sending and receiving e-mail and finding information on-line. This led AOL and Compuserve to build their own equivalents to the World Wide Web as a means of adding value to their services and attracting customers. Today, much of this investment is redundant. People don't want to pay for these special services if they can get all the resources of the Internet for no extra cost.


To compete for subscribers today, AOL has to sell champagne and call it lemonade. Predictably there has not been enough champagne to go round.





Robert Farish is the editor of Computer Business Russia; fax: 929-9958; e-mail: farish@sovam.com