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AOL Will Raise Internet Service Rate $1.95 Per Month to $23.90

22 May, 2001 By: Hive News

AOL Time Warner Inc. will raise its monthly Internet service fee for the first time in three years, an 8.9% increase.

According to Bloomberg News, some analysts said the price jump may slow subscriber growth.

Effective in July, the $1.95 increase will lift the fee paid by most of America Online's more than 29 million subscribers to $23.90. The move could boost AOL's annual revenue by up to $680 million.

AOL's 1998 price increase, their last one, sliced the pace of customer growth by half, analysts remind. It also increased the rate at which customers left AOL. The leading Internet service added 17 million subscribers since that last price increase.

The increase may add $600 million in cash flow, or earnings before interest, taxes, depreciation and amortization, next year, analysts said.

AOL rivals such as EarthLink Inc., the third-largest U.S. Internet-service provider, and Microsoft Corp.'s MSN, the second largest, may follow suit and raise their monthly prices.

EarthLink, with 4.8 million customers, charges $19.95 for unlimited Internet access. Microsoft charges its 5 million online customers $21.95 a month.

Shares of Atlanta-based EarthLink rose 93 cents to $14.42, and Microsoft rose 48 cents to $69.27.

AOL Time Warner shares rose $1 to $57.60 in early afternoon trading.

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