Time Warner announced on Tuesday a major restructuring of AOL products and services in order to revive the formerly most recognized brand in Internet service providers. The plan will eliminate AOL subscription services for broadband users (currently $15 per month) while it continues to provide a low-speed dial-up service for $9.95 per month. Most AOL services--including its popular email, instant messaging and other software--will be free to all broadband users.

AOL still remains the nation's top Internet service provider with 17.7 million subscribers (down from 26.8m in Sept. '02), yet those subscribers were not generating enough ad revenue for the company. Under the current system, AOL ads were viewed mostly by its own subscribers rather than through a combination of subscribers and random web surfers. As reported in The Economist, in the last quarter, AOL's members "made up 36% of unique visitors who generated 80% of its page views".

Through this shift in strategies, AOL stands to lose " hundreds of millions of dollars in access fees but is gambling that it can more than recoup that money through fast-growing advertising revenue from its AOL.com Web portal and through cost cuts that will reach $1 billion by the end of 2007."

Another consequence of its restructuring came in an announcement on Thursday that it will shed 5,000 jobs, roughly one-quarter of its global workforce over a six-month period. AOL will begin closing customer service call centers in the United States, while it begins to find buyers for its French, German and U.K. businesses. There are currently 3,000 European AOL employees.

Also announced were a number of new features that, starting in September, will free to users with AOL or AIM screen names, including 5G storage on AOL'sX-drive. Non users will be charged a $10 per month fee for this service.