America Online lowers rates 60% for access time

April 26, 1993

VIENNA, Va. -- America Online Inc., a provider of computer data-base services, Tuesday announced price cuts of as much as 60 percent, sending its stock reeling.

The company, the nation's third-largest provider of online services, said it would provide access to all of its services for up to five hours a month for $9.95. The new rate, effective May 1, replaces the current charge of $7.95 for up to two hours of use, and $6 for each additional hour, or a total of $24.95 for five hours.

The company said it expects 90 percent of its subscribers will not use its services more than five hours a month. If they do, they can buy additional online time at $3.50 an hour, effective July 1, it said.

America Online stock skidded as low as $17.75 a share in Nasdaq trading before recovering to end off 62.5 cents at $22. But shares ended the week at $24.25, up $1.625.

America Online, according to a study by Link Resources and Martin, has about 250,000 household subscribers. Prodigy has about 1 million and Compuserve, which targets small businesses, has 750,000 to 800,000 household subscribers.

Compuserve charges $49 for five hours service, while Prodigy charges $22 to $29, according to Rick Martin, a stock analyst.

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