AOL Launches European Invasion On Two Fronts

American Online, Inc. is attempting to ensure European Internet supremacy by mounting a two-pronged attack against English and German competitors.

On Tuesday, AOL and German media giant Bertelsmann AG will launch Netscape Online, which will offer free Internet service in Britain. The move is designed to neutralize Freeserve, whose free service has garnered more than 1.4 million users in the U.K, as well as to open the door to other European markets.

Freeserve is owned by Dixons Group Plc., Britain’s largest electronics and appliance retailer.

The German Front

Later in the week, AOL will switch its focus to Germany. The company is expected to announce a flat monthly fee for unlimited AOL usage, thereby undercutting the price of its chief rival Deutsche Telekom AG. AOL Europe’s Chief Executive Andreas Schmidt declined to say how much the flat fee would be, but German media has been reporting a monthly fee of 20 marks (DM) for unlimited access. Users, however, would still have to pay the local phone charges based on the amount of time they stayed logged on. The same applies to the U.K.

Industry observers say that when AOL was blind-sided by Freeserve last year, its top brass decided it was time to reorganize its loosely controlled confederation of European operations and mount a massive counter-attack. In January, AOL appointed Schmidt to head its European properties. Since then, Schmidt has said that the company is preparing a strong campaign to capture the next stage of Internet growth in Europe.

More To Follow

Analysts contend that once Netscape Online is up and running in the U.K., it could easily be adapted for other countries. In addition, some even speculate that CompuServe, also owned by AOL, is being tweaked to fit the European business-to-business online market. Even though AOL’s announcement is still a few days away, its German competitors are already beginning to react.

Deutsche Telekom claims to have no plans to develop a flat rate for Internet access, but Mannesmann AG and Mobilcom AG have both announced that they now plan to break into major German cities this year. However, any company that decides to go head-to-head with AOL will have its work cut out for them.

Additional Clout of Bertelsmann

Bertelsmann’s stake in AOL and their joint ventures boosts the chances of a successful European Internet Blitzkrieg for AOL. Observers are bracing for quite a battle, since Bertelsmann’s $12 billion (US $) annual revenue should easily help pay for a huge multimedia campaign touting AOL’s service throughout Europe. In the meantime, Bertelsmann AG will be chasing eBay with its own Internet auction site.

AOL TV for Germany?

In a breaking development, AOL’s Chief Executive Steve Case said yesterday in Germany’s Focus magazine that the company also plans to launch a television channel in Germany called AOL-TV. The channel would offer e-mail and chat-room services.

Case added that it is possible that AOL’s partner in the TV deal would be Bertelsmann.