Why the fuss over the AOL Internet Phone Service launch?

Has AOL done anything right this millennium?

We all know the answer to this (and yet I continue to hold a few shares).  Then why does Jeff Pulver go on to say "I believe AOL will end up teaching the rest of the IP Communications Industry on how to market cool and geeky technologies to the masses. I look forward to being one of their students." (see: Jeff Pulver's blog)

It is disturbing to see the number of respected VoIP professionals supporting AOL's announcement.  I wonder if its time for bloggers to declare any affiliations with the company they mention overtly (i.e. consulting revenues, etc.). 

As some background, the company's membership continues to dwindle, with 4Q'04 results in its core domestic market dropping 464k* members in the quarter ending December 31st.  A 2mil member decline in a year, down to 22.2mil total.  This tells me that AOL ISP customers don't feel they are getting value and cannot avoid the offers being made by Telco the CableCo broadband bundles.  The gains in its domestic high-speed Cable offerings are still insufficient (with YE'04 total subscribers of 3.9M, up less than 700k during the entire year) to make up for the above retention issues. (* all figures come straight from filings posted on the AOL/Time-Warner corporate website).

Why do I regard today's AOL announcement weak?

• They are six months late!  With everyone and their brothers already in the market and many other great brands (Vonage, Packet8, Verizon) offering very competitive products and most at better price points.
• Speaking of Pricing, AOL's is off and clumsy from a customer value perspective.  AOL should be looking at VoIP as a retention tool (for the number of loyal customers who have stuck by them) and mirror the Apple iPOD "halo" effect to hopefully attract ISP customers via a competitive VoIP offering.  The current short-term promotional pricing is kind of attractive, but after a few months there really is no customer pull in the offer.  G4TechTV's AOTS "The Feed" segment already commented on tonight's episode that the pricing&plans AOL offers appear to be written in Latin.  Why not just do a simple value-add option to existing AOL users?  AOL needs to start looking at profitability from a customer bundle perspective rather than a product-centric view.  Imagine the confusion if they try and mix in a cellphone offering into the pricing?!?  AOL needs to make its pricing and plans more compelling... or customers just won't care.  AOL Canada's offered VoIP for a couple of months now, anyone think they are even close to 5000 sign-ups?  I'll take the action!
• More confusion and missed opportunities - People don't expect perfection from VoIP, and AOL should be able to easily meet these expectations.  AOL/Time-Warner have already been offering their Digital Phone service to Cable subscribers, so a VoIP offering (even if a little cheaper) just sounds like more technology being shoveled down to their customers.  They definitely need to clear up the confusion here!  On the plus side, why not use perceptions to their advantage?  Just the mere fact of using the same backbone and reducing hops should allow AOL to promise better quality to AOL callers within their network (aka "on-net").  Sure they could use QoS, etc... but just marketing the perceived notion of better quality could lead to some customer-get-customer pull through (think of MCI's Friends&Family).  Throw in a referral program and you've got viral marketing going!  Remember the good old LD days of the 80s/90s?  Sprint worked on improving their quality perceptions with a simple pin dropping next to their fiber network.  Of course, they didn't have any special network that others didn't, but they worked on the perceptions and their customers thought the Sprint lines were cleaner.  AOL needs to bring its network and heritage to the deliver the same kind of perceptual advantages.

What has AOL done right?

Simply, their web dashboard.  Something easy and interactive for customers to use and feel the benefits of using an Internet Phone.  Add in presence, integration with AIM (isn't it time for AOL to consolidate AIM and ICQ?), uniform buddy lists, audio calling via instant messenger users worldwide, SMS capabilities to the AOL IPS telephone number and smart call forwarding options (again integrated into the presence capabilities of AIM); and AOL may get a unique VoIP service that delivers retention benefits, all via delivering convenience and a seamless service.  AOL has the ability to leverage its product portfolio, why aren't they leaving it all on the field?

Please share your thoughts on the AOL IPS offering and most of all let us all know if you think customers will care!

Comments

[T1 internet service]

Interesting comments about AOL Internet phone service.
T1 internet service is the future of broadband communications. http://www.1-satellite-tv-facts.com/T1-Internet-Service.html

[Adam - DSL high speed internet access]

I agree wholeheartedly about the comments you made about AOL. I used to have AOL and have changed to another ISP.