Originally created 01/16/97

Lawsuit says AOL can't handle traffic

America Online cannot handle the increased load that has resulted from its new price plan for Internet service, a lawsuit contends.

The suit said that AOL subscribers have encountered "busy and unavailable phone lines and/or inaccessible computer equipment" since the company began offering unlimited access for a $19.95 monthly fee at the beginning of the year.

"They try over and over and over again to try and get in and they get a constant busy signal. One client tried 26 times the other night," attorney Louis Marlin said Tuesday.

The suit, filed in Los Angeles on behalf of five California men Monday, seeks class-action status.

The plaintiffs, claiming negligence and consumer fraud, are seeking at least $20 million in compensatory damages as well as punitive damages and attorneys' fees.

Mr. Marlin said that figure is only a minimum estimate.

The suit also asks for a court order stopping AOL from selling any more unlimited-access service until it has equipment to handle the increased number of users.

"Every new subscriber they get makes it more difficult for the existing subscriber to connect to the service," Mr. Marlin said.

In a statement, the company said that it expects to win the lawsuit.

"Although we understand the frustration some members are experiencing at not being able to obtain immediate local access during peak periods, the average AOL member gets more value under unlimited pricing than ever before," the statement said.

The company plans to expand the system's capacity through a $250 million addition over the next two months.

In December, AOL spokesman Steve Sigmund said that users were staying online 20 percent longer since the unlimited access went into effect, averaging 3 million hours a day, up from 1.6 million hours a couple months before.

A similar lawsuit against AOL was filed in Chicago on Dec. 18, according to plaintiff's attorney Alan Goldberg.

While AOL plans to continue offering its subscribers the flat-rate, time is running out for other Internet users who meander for hours without worrying about the bill.

In some corners of the Net, flat rates have already come and gone. Instead, Internet access companies are charging more, even by the hour, but promising reliable connections.

Netcom On-line Communications Service Inc. of San Jose, Calif., a pioneer of the flat-rate price, plans to announce a return to hourly rates next month. Others, while still allowing unlimited usage, are charging double the going rate to keep lines open.

Consultants at the Gartner Group predict that in three years the meter will be running for three-quarters of all Internet service.

Flat-rate can easily be a money loser for online companies. At a cost of between 90 cents and $1.80 an hour to connect a user, Internet providers who charge no more than $19.95 a month start losing money after as little as 11 hours, said Eric Paulak, an analyst at Gartner Group.


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