AOL Blinks

After losing some 2 million subscribers last year, Time Warner's (NYSE: TWX  ) America Online finally blinked. The world's largest ISP yesterday launched a new low-cost dial-up service under the Netscape banner, hoping to keep some of the subscribers who are fleeing to cheaper competitors.

The Netscape Internet Service offers unlimited access and web-based email for $9.95 per month -- the same priced charged by United Online's (Nasdaq: UNTD  ) NetZero and Juno. Investors must think AOL will be successful in retaining a significant number of its users: When rumors of its $9.95 offering hit last October, United's stock took an 18% hit, and hasn't recovered.

To understand why competitors have cause for concern, consider this likely scenario of an AOL user who decides that $23.90 per month is too steep for dial-up service. Perhaps she has heard about NetZero's $9.95 deal, or its $14.95 "high-speed" service (still dial-up, but a bit faster than normal because of special downloading technology for certain files and pictures).

In order to cancel AOL, she has to call the company. At that point, the phone representative offers to switch her to the new low-priced service. Why should she go through the trouble of signing up with a new ISP when she can just get her bill cut by more than half right then and there?

In an interview with The Washington Post, an AOL spokesman said the new service will also be marketed to the 20 million users visiting the Netscape website each month.

Finally, in a unique twist, Netscape is auctioning off 200 of the most popular email names on eBay (Nasdaq: EBAY  ) . If you want to be the only "bob@netscape.com," for instance, you'll have to pay for it. Bidding in that particular auction is already up to $78 with six days still to go.