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Monday, July 19, 1999 Published at 10:53 GMT 11:53 UK

Business: The Company File

America Online targets freeserve

The world leader has seen free services expand the UK market

The world's largest provider of Internet access, America Online, is setting up a free service for UK Web surfers.

The move means it will be taking on UK market leader freeserve and the dozens of other copycat free services for Internet use.

The BBC's Rory Cellan-Jones: "Now AOL is being forced to offer its own free service"
America Online's new service, called Netscape Online, will be launched next month.

The move will allow America Online (AOL) to compete with freeserve, the internet service launched by Dixons.

Netscape Online will be offered alongside AOL's existing paid-for services, which include CompuServe and AOL UK.

AOL UK's Managing Director David Phillips said Netscape Online could be the best in its class with its "cool" brand name and services.

He said that the content of rivals such as freeserve failed to appreciate the audience they are serving.

"It's twentysomething, more male, more single. We think there's a gap between their offering and their market audience. Eighty-seven per cent of it is male, earning less than £19,000, we think we can focus on that demographic."

freeserve study

Despite sticking with its charges so far, AOL has about one million subscribers in the UK, including 400,000 CompuServe members, and more than 20 million subscribers worldwide.

freeserve, set up by high street retailer Dixons last year, was one of the UK's first free Internet Service Providers.

Its success has been such that it is to be floated with a valuation of about £1.5bn.

It has 1.32 million active users and has forced many paid-for services to drop their charges.

Bob Pittman, AOL's president and chief operating officer, said the launch of Netscape Online followed an internal study to find out how freeserve was affecting the industry.

Mr Pittman is reported to have said that AOL had not been hurt by the emergence of freeserve.

The study was ordered to find out whether the British firm was "taking a piece of the AOL pie ... what we found was that they added a new slice of pie".

He said Netscape Online will run over AOL's telecommunications links and will include two popular AOL features - instant messenger and buddy lists that allow users to exchange messages with friends and colleagues online.

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