Many -- oh so very many -- of us long ago bid goodbye to dial-up and never looked back. But some people do still use dial-up, dinosaurlike though it may seem. A lot of them use Time Warner's (NYSE:TWX) America Online, although its users' rapid defections have been common news for several years now. On Wednesday, it came to light that Microsoft (NASDAQ:MSFT) has delivered another blow by cutting the price its MSN unit charges for dial-up Internet access.
Microsoft's slashing the price of dial-up access to $17.95 per month. Although that's still pricey in a world where broadband prices have eased, it does put AOL's recent price hike for dial-up service in sharp relief. Yep, you heard it right -- despite the push for cheap broadband, AOL is actually increasing its monthly fee for plodding old-school dial-up access to $25.95 per month. That's despite the widespread departure of AOL's dial-up subscribers for the virtual comforts of high-speed Internet access.
Although AOL's move definitely sounded like something from the "confuse and conquer" line of warfare, it has its own strange logic. As AOL evolves, it would rather push users toward high-speed Internet services anyway -- hopefully its own -- while luring them to its new content offerings, which are admittedly broadband-centric.
Of course, AOL's not the only Internet service provider charging puzzlingly high fees for awfully slow dial-up. EarthLink (NASDAQ:ELNK) also charges $21.95 per month for the old-school approach to Internet surfing. Meanwhile, United Online's (NASDAQ:UNTD) NetZero costs a rock-bottom $9.95 per month.
I've long thought that AOL's migration toward content and higher-quality service offerings made sense; contrary to its Internet-bubble-era reputation, it's no longer the "Web for newbies" service. Fool Rick Munarriz disagrees, though. In a recent article about AOL's dial-up price hike, he pointed out that it's losing some of its home-team advantage by shoving users toward the wilds of the Web instead of its old community-based offerings. The jury's still out on whether AOL's savvy or silly in breaking up the invitation-only garden party that used to be its service.
Microsoft's undercutting of AOL and EarthLink with its MSN dial-up price is the real puzzler. Why even bother? Maybe it's just because Microsoft's a cash-rich giant, and therefore it can? News agencies see it as a way to try to woo AOL's dial-up subscribers, but let's face it -- the dial-up dinosaur is on its way to extinction. Even those folks who stubbornly cling to dial-up connections will eventually realize that the only thing they have to lose by getting high-speed Internet is frustration -- indeed, there's a good argument that dial-up is really a waste of money, not to mention time and productivity, at this point in the game. Last but not least, this news conveys the strange and interesting image a bunch of venerable companies fighting over quickly disappearing scraps.
Time Warner is a longtime Motley Fool Stock Advisor recommendation. Microsoft is a Motley Fool Inside Value selection. Pick the Fool investing service that best fits your investing style and take it for a free, 30-day trial run.
Alyce Lomax does not own shares of any of the companies mentioned.
