EarthLink raises Internet-access rate

Internet service provider EarthLink today surrendered its claim as the most inexpensive of the big three ISPs, raising its basic rate for unlimited dial-up access from $19.95 to $21.95. The increased fee is effective July 2 for new customers and Aug. 1 for its existing 3.1 million subscribers.

The move follows rival ISP leader America Online’s rate hike in May, which increased its rate 9% from $21.95 to $23.90. The AOL Time Warner unit said yesterday its customer base has doubled in the past two-and-a-half years, surpassing 30 million-subscribers.

Microsoft’s Internet division MSN attempted to use the AOL fee increase to lure customers from the ISP giant. The company spent $50 million on an advertising campaign offering new subscribers a guaranteed rate of $21.95 until Jan.1, 2003. The 5 million customers MSN currently claims pay $21.95 per month for Internet service.

In the weeks following AOL’s rate-hike announcement, EarthLink waited to see whether customers would flock to its cheaper $19.95 offering before making any rate increase decisions, an EarthLink spokesman said.

“We didn’t see a significant overflow [of customers] and felt that the time was right to get on parity with other providers in the business,” he said.

The spokesman said the increase would have a “net positive” effect on the company’s revenue but did not provide specific projection figures. He said more guidance would be offered during EarthLink’s July 19 earnings call.

The price of Earthlink shares increased 7.33% in mid-day trading to $13.17.