Copyright 2003 Toronto Star Newspapers, Ltd.

The Toronto Star

November 13, 2003 Thursday Ontario Edition

AOL Canada Inc. finally has a national high-speed Internet service.

Kind of.

The popular Internet service provider will announce a new service today that boosts the speed of dial-up access by up to five times, using a data compression technology from Waterloo-based SlipStream Data Inc.

The product, called Netscape Online, was developed "exclusively for Canadians" and is meant to be an affordable but slower alternative to cable and DSL high-speed services, which have nibbled away at AOL Canada's subscriber base over the years.

The company - claiming about 500,000 subscribers in Canada - has priced the new service at $18.95 a month.

"We are paving new roads for consumers who don't have access to cable or DSL services and for laptop users seeking portable high speed with local dial access," Craig Wallace, president and chief executive of AOL Canada, said in a statement.

The Royal Bank of Canada owns 20 percent of the America Online Inc. subsidiary.

Ian Angus, president of Angus TeleManagement Group, said the new service won't attract new customers for AOL Canada but will help it keep existing customers from fleeing to rivals.

"If all you want to do is download off the Net, a compression technology that achieves what a higher-speed connection can do will do the job," said Angus.

Still, users of the new service won't have some of the benefits true cable or DSL high-speed products offer, Angus said, pointing out that always-on access or telephone/Internet line sharing isn't available through dial-up service.

By contrast, DSL and cable services don't tie up phone lines and can be left connected to the Internet 24-hours daily. High-speed service has become so popular it now accounts for a growing majority of Bell Canada's residential Internet customers.

But the price of Netscape Online and speed that's comparable to Bell's lowest-priced basic DSL product may convince some Internet users to stick with or even come back to AOL Canada. And if that doesn't work, the ISP, known for its popular "You've Got Mail" catchphrase, has another broadband initiative to compete head-to-head with Canada's telephone and cable companies.

In September, AOL Home Networking was launched in parts of British Columbia, Alberta and Ontario for $44.95 a month via a DSL resale arrangement with Burnaby, B.C.-based Telus Corp. and other high-speed carriers. The company said it has plans to extend that broadband service to the rest of Canada over the coming months.

Some experts say AOL Canada was late to enter the high-speed market and will have a difficult time catching up, particularly as Rogers Cable and Bell Canada continue to duke it out in what continues to be a low-margin business.

Others, such as Angus, hold that AOL's niche of making Web surfing an easy experience for people will remain an attraction to some consumers. There's also the fact that dial-up service remains a higher-margin business than the high-speed alternative.

"They do have a remarkably large and relatively stable group of users," said Angus. "They hide a lot of the complexity with an interface that people can work with."