AOL cuts Net access fee

America Online (AOL) has slashed its main monthly subscription charge in the UK, but said a freephone dial-up service is still at the testing stage.

The world's largest online service said that from 1 June, it will reduce its UK connection fee from £16.95 to £9.99 per month.

Although not cited by AOL as a reason for the reduction, free Internet access services such as Dixons' Freeserve have shaken AOL's market position. In just six months, Freeserve has come from nowhere to become the market leader in terms of subscriber numbers, and other free ISPs have launched a variety of offers and niche products.

However, free ISPs rely on relationships with telcos that allow dial-up call revenues to be split, and experts claim this could ultimately be their Achilles heel. Knowing this, AOL has aligned itself with consumer groups pushing for a regulatory regime that would make unmetered local calls a choice for users.

A spokeswoman for AOL UK said: "We've had to adapt to the situation in the UK market, and at the moment there's an artificially high level of revenue from local calls. The biggest bit of a user's Internet bill is nearly always the phone bill."

In the US, where local calls are unmetered but monthly Internet access is rarely free, AOL said users spend an average of 55 minutes per day on the Internet. In the UK, the figure is under eight hours per month.

AOL also announced the European phase of a strategic alliance with online auction company, eBay - the type of relationship it hopes will fuel ecommerce over its network.

Andreas Schmidt, CEO of AOL Europe - a joint venture with German media giant, Bertelsmann - said advance sales of £25m over the next two years, and alliances such as those with eBay show the company has a sustainable model to achieve long-term growth.