The AOL List: Empty Promises

David Cassel (
Sat, 18 Jan 1997 01:50:37 -0800 (PST)

		      E m p t y   P r o m i s e s


"[I]t appears that you have offered a service in Connecticut that you are
unable to provide adequately," reads a letter from the Connecticut
attorney general, addressed to AOL counsel Randall Boe.  "I am extremely
troubled by complaints brought to my attention by Connecticut consumers
and businesses." 

Citing "serious concerns about these potential violations of our consumer
protection laws," Richard Blumenthal joined attorneys general from New
York and Wisconsin--all pursuing complaints against the company. 

AOL pointed Blumenthal to their Terms of Service, which--modified October
31--now say AOL offers service on an "as is, as available" basis, with no
guarantees except those mandated by law.  But they still have an
obligation.  "Reasonable access is, of course, an essential part of the
service you offer," the attorney general responded in a statement
Thursday.  "Thousands of Connecticut consumers have paid for a service
that, very simply, they are not receiving."

Press coverage applauding AOL's January 16 announcement that they would
spend more money on modems overlooked the fact that Blumenthal's original
letter was sent January 10--saying the current state of affairs was
unfair, deceptive, and a violation of the Connecticut Unfair Trade
Practices Act.  (  A
Wisconsin attorney general's spokesman told C|Net the day before the
announcement that attorneys general from 19 states would probably
investigate the complaints. 

But why would AOL sell a service they can't offer?  "I think what we're
seeing here is perhaps a novel way of corporate financing," one attorney
told CNN.  Representing class members in a suit against AOL, Stanley
Saltzman decided the situation "may be a novel way of venture capital
being raised."  In fact, AOL originally planned to switch each and every
user to $20-a-month plans without asking them.  "They need money," a
Forrester Research analyst told the Boston Globe (11/2/96).  AOL wouldn't
back down until attorneys general from 19 states expressed concerns.  Then
they started promoting nonrefundable pricing plans in which users pre-pay
for two years of service.  AOL's financial analyst told the Wall Street
Journal they hoped to raise $100 million... 

The company still said they were expecting losses until June of 1997.  But
now, they've been prodded by the attorneys general into spending an
additional $100 million to upgrade their phone lines.  Current lines are
clearly at capacity, which maximizes costs -- but the ads may not have
materialized to make that time on-line profitable.  A company official
told Advertising Age that AOL has just 9 advertisers whose budget for AOL
cracks $1 million. 

There's another issue, too.  The Washington Post reported that 1.8 million
subscribers left AOL in the last three months of AOL's 1996 fiscal year.
In an October conference call, Steve Case announced he would address this
with "Loyalty labs", which consisted of aggressively probing users as they
unsubscribe from the service.  "In many cases, 20% of the people decide
not to cancel after talking to us," Case said.  Weeks later, Business Week
reported that customer service agents would get a bonus if they talked
customers out of unsubscribing (10/14/96).

Now AOL has disabled online cancellation, so departing subscribers *must*
speak to the on-commission service agents.

In addition, the Federal Trade Commission's Virginia Davidson recently
contacted an AOL watchdog web page saying many customers were complaining
that calls to AOL's toll-free number are ineffective.  "I have been
battling with First USA Bank over AOL and GNN charges," one subscriber
told the AOL List.  "I cancelled them by phone and by letter, a total of 6
contacts back in September--and I still get bills!"  In fact, dozens of
users have reported that after completing the cancellation procedure, AOL
continues to bill them.  One credit card company told the Chronicle they
were flooded with calls from subscribers trying to cancel AOL payments. 
Constantly.  "We're about ready to shoot AOL," they complained.  A
subscriber added that "It was really surprising that it was so easy to
sign up and so hard to get off."  But how hard is AOL trying?  One of the
company's former customer service staffers said that when he worked for
the company, the teenagers they hired would sometimes take cancellation
requests, "and throw them in the trash."  Why?  "To get out of working." 

The two problems negate each other--providing bad service, and then
mismanaging cancellations.  And AOL has been remarkably circumspect about
1-888-265-8888.  The 19 attorneys general insisted AOL establish the
toll-free number in December to handle member inquiries and complaints
about the new flat-rate service. 

"AOL under siege" reads the C|Net headline, citing new class actions filed
in Seattle and Detroit.  And so the cliff-hanger continues.  CEO Robert
Pittman even snapped at the New York Times when questioned about their
current efforts, saying AOL has been working round the clock to address
service complaints.  "Am I bloody?" he asked rhetorically. "Yes.  Do my
eyes have circles under them?  Yes."  But the ultimate signal may have
come in Thursday's Community Update about the service upgrade.  Steve Case
usually signs his letters "Warm Regards".  This time he just said

He must be feeling crabby after all those late nights. 


The attorney general of Alabama included an "E-mail us" link on their web

Ironically, it directs mail to the state prosecutor's AOL account.

        David Cassel
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