AOL ends fee for broadband users

Time Warner Inc., the world's largest media company, said it will give away its AOL service to high-speed Internet users, sacrificing subscriber revenue in a bet that online advertising will compensate for the loss.

New York-based Time Warner yesterday also reported second-quarter net income of $1 billion, or 24 cents a share, compared with a year-ago loss, as higher cable-television sales made up for customer losses at AOL.

The Internet unit will offer AOL e-mail service and security software free to users with broadband connections, an effort by chief executive Richard Parsons to restore sales growth. Revenue at AOL, which has been a drag on Time Warner's earnings for five years, fell 2.4 percent in the quarter as it lost 976,000 subscribers.

``They needed to do something with this business, it was in constant decline," said Dan Poole, who helps manage about $34 billion including Time Warner shares at Cleveland-based National City Corp. ``The old model just didn't work."

Abandonment of its focus on subscribers marks a shift in strategy for AOL, which started up as a dial-up service in 1985 and became the most popular U S online network before users began to defect to faster or cheaper Internet access.

``We're going to stop sending our members to our competitors," AOL president Jeff Bewkes said .

The number of U S subscribers dwindled to 17.7 million in June from a peak of 26.7 million in September 2002.