ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Tuesday, January 28, 1997 TAG: 9701280074
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
DATELINE: NEW YORK
SOURCE: Associated Press
As America Online attempts to fix a recent rash of technical problems, businesses dependent on the Internet are struggling to cope.
John Goodman, a public relations executive based in Scarsdale, N.Y., uses America Online to communicate with customers, but last week he was unable to send or receive e-mail for two hours due to an America Online brownout.
``When e-mail goes down, it's like severing an artery,'' Goodman said.
For businesses whose e-mail address ends in ``aol.com,'' the company's recent woes are a convenient symbol of frustration with the broader Internet, the vast worldwide network of interconnected computers that people can tap from any properly equipped computer.
The nation's largest on-line service has been swamped with more users in recent months than it can reliably accommodate because of an aggressive marketing campaign. It not only has signed up hundreds of thousands of new subscribers, but offers a new pricing plan that for $19.95 a month gives people unlimited on-line time.
The result is often annoying busy signals for subscribers attempting to log on during periods of heavy usage. The company also has been plagued with a recent rash of technical glitches such as e-mail ``brownouts'' as the company attempts to upgrade its network to accommodate the new users.
The situation illuminates the growing importance businesses place on the computer Internet. Use of the Internet from work surpassed use from home this past year, with 15.6 million people logging on from work or school compared with 10.3 million from home in September, according to Inteco Corp., a market research firm based in Norwalk, Conn.
For this new group, getting lost in cyberspace can be downright disruptive to livelihoods.
``If I were to depend on America Online, as I had for nine months of the year in 1996, I would be a dead duck now,'' said Bob Djurdjevic, owner of Annex Research, a Phoenix-based high-tech market research and consulting firm.
Djurdjevic says that busy signals at America Online spurred him to switch to another Internet service, but that he has found other problems in his new provider with delays in sending and receiving e-mail messages.
The problems in some ways exemplify the broader Internet's problems. A surge in the use of on-line and Internet services has clogged up the phone lines that people have grown to rely on for everyday work and communication.
Yet America Online's situation stands out. Its stock is being hammered. America Online stock tumbled 6.8 percent Monday, or $2.50 a share, to $34.25 on the New York Stock Exchange.
New York State has threatened to sue America Online by Thursday unless it promises refunds and stops promoting a plan it can't reliably deliver, part of broader pressure it and 19 other states are applying on America Online.
America Online, based in Dulles, Va., has yet to formally respond. But it says it is spending $350 million between now and June to upgrade its network, including buying modems, building a data center to house computer equipment and adding customer support representatives.
In addition, America Online is selectively offering refunds to customers who call complaining that they can't get the service they paid for, company spokeswoman Wendy Goldberg said.
America Online apologizes for the problem but insists that it was a victim of its own popularity.
``We had no idea of the incredible surge in demand we would see. It did exceed our wildest expectations,'' Goldberg said.
But some say the issue at America Online is not merely whether technology has failed to meet a surge in new customers seeking to go on line. It's whether the company has broken an ethical trust with consumers by selling them a product it couldn't reliably deliver.
Analysts say the situation is giving AOL a black eye in the short run, which may cost them subscribers. But in the long run, it should be able to weather the storm and basically stay on track to grow from 8 million current subscribers to 10 million by the end of 1997.
``This is not unusual for the company to have yet another large problem. A company that is leading the market is the first one to feel the brunt of the issue,'' said Abhishek Gami, an industry analyst with Nesbitt Burns Securities Inc.
LENGTH: Medium: 80 linesby CNB