AOL Pays Up

CHICAGO: Struggling to defuse a public relations fiasco punctuated by irritating error messages, busy signals and e-mail brownouts, America Online agreed to provide refunds for disgruntled users. Facing lawsuits in 36 states over its inability to provide unlimited access to the service as advertised for $19.95 a month, AOL has also imposed a moratorium on the advertising that made it the worlds largest online service, promising instead to use the funds to improve its swamped servers. The move pleased Wall Street, sending the Reston, Va. companys stock up $1.75 to close at $37. According to the agreement, users will have two ways to get at least partial refunds for December and January. Members can either mail a letter to a company post office box for a full one-month refund, or wait for an automatic rebate, the amount of which will be determined by how much time they managed to log on to the service during the two-month period. AOL also agreed to suspend all advertising for February and include disclaimers of possible bottlenecks in future commercials if problems persist. The company reaffirmed its plan to spend $350 million between now and June to upgrade its networks. Service interruptions multiplied at years end after AOL's massive advertising campaign for its new $19.95 per month flat rate attracted more than 100,000 new users in December alone. Last weekend, hitting AOL where it lives with a sardonic commercial viewed by more than 100 million Super Bowl viewers, rival CompuServe parodied the constant busy signals, inviting online users to come on over to a more reliable service. In announcing the settlement Wednesday, Illinois Attorney General James Ryan said it wasn't the delays so much as the slick ads promising quick and easy service that drew the ire of users and politicians alike. "If a product is advertised, the consumer has the right to have that product as it was advertised."