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Earthlink Follows AOL, Raises Rates By US$2 Per Month

Earthlink Follows AOL, Raises Rates By US$2 Per Month

by , 4:50 PM EDT, June 26th, 2001

Earthlink has followed AOL's example and raised rates for its dialup service by US$2 per month, bringing the service to US$21.95. AOL raised rates by US$2 per month in May. Earthlink sent out letters to its subscribers that informed them of the rate increase as well as additional services such as more Web site space and additional optional e-mail names. We were forwarded the letter from an Observer who requested anonymity:

Dear EarthLink Subscriber,

We are raising the monthly price for our basic, unlimited dial-up Internet service. The price increase of $2.00 per month will go into effect July 2, 2001 for all new subscribers and August 1, 2001 for EarthLink's current customers.

We have added some additional features to this service plan. While you currently have just one e-mail address included, you will soon have seven more, for a total of eight e-mail addresses on each account. Also we will add more webspace [sic] to many of your accounts to bring everyone up to at least 10MB.

We do offer a one-year, prepay option. If you pay up front for a year of service, your monthly rate will effectively be $19.95 for the next 12 months. To do this, please reply to this e-mail with the word "prepay" in the subject line, or call one of our Customer Service representatives at 1-800-890-6356.

Thank you for being our customer. We are committed to working hard every day to bring you the best service in the business.

Sincerely,

Garry Betty, Chief Executive Officer
Mike McQuary, President

MSN was quick to counter AOL's price increase by offering those who switched to MSN a guaranteed price of US$21.95 per month, the same price that Earthlink is now charging, through January 1st of 2003. There has been no reaction from Microsoft regarding Earthlink's own rate hike. Wall Street has reacted positively to the news, sending Earthlink's stock higher by US$1.56 (+12.71%) to US$13.83 per share. From a Reuters report:

"We are confident that the company should meet our 2001 estimates, with potential for upside surprise, as the majority of the price increase should fall directly to the bottom line" added Fred Moran, an analyst at Jefferies & Co., in a research note. "This move reaffirms the pricing power being achieved by the dominant ISPs."

The same report noted that AT&T still offers its WorldNet service for US$19.95. You can find more information on Earthlink at the company's Web site.

The Mac Observer Spin:

There is little doubt that customers will be a bit less sanguine about the price hike than Wall Street. Go figure. There is still competition in this market, however, despite the market share that has accumulated in the hands of AOL/Earthlink/MSN, and hopefully local and regional ISPs will get a boost from these hikes by the major players. It is more likely that other companies will actually follow suit and consider their own price hikes as "safe" bets. This is especially true for AT&T, Sprint, and the other telecoms that offer Internet access.

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