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Running From Dial-Up Access

It is also partnering with network operators to offer AOL services as the default page their Internet customers see when they sign on.

In wireless, AOL has teamed up with cellular carriers to make AOL services available on their phones, for which it shares some subscription revenue. For broadband, it announced a deal this week with its sister, Time Warner Cable, involving sharing of AOL's advertising dollars and the cable firm's DSL subscription revenue.

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Yahoo had a similar DSL pact with SBC Communications, and it announced another last month with Verizon Communications.

The SK-EarthLink venture is different in that it will be buying and reselling access, not just doing a joint marketing deal. As such, SK-EarthLink represents a new breed of mobile phone companies you likely will see more of this year. They're called "virtual" operators because they don't maintain the underlying connectivity but do handle all marketing, billing, customer support and -- most importantly -- the content and services that customers use.

Virtual operators tend to target niche audiences, people eager to buy fancy pocket devices so they can do on the run what they already do on the wired Internet. One early virtual operator is Virgin Mobile USA, the joint venture between Sprint and the Virgin Group that targets young people.

Disney has announced plans for a virtual mobile ESPN network aimed at sports fans.

"This is the year the virtual mobile operator is going to explode into the marketplace," predicted Jeff Kagan, a telecommunications analyst in Marietta, Ga.

What's driving companies to jump in, Kagan said, is that U.S. carriers are finishing major upgrades to their networks, allowing wireless data transmission at high speeds and making mobile Internet access -- and wireless video services -- much more feasible than in the past.

Yet Kagan and other analysts wonder how SK-EarthLink can compete with Sprint, Verizon and other carriers it will have to buy access from, when those same carriers are rolling out their own TV, music and Web-surfing services.

But Dayton said the carriers are hungry for more customers, even at wholesale rates. He added that the dial-up Internet era showed there is a huge difference between "the pipe" and what you do on top of it: "That leaves a tremendous amount of latitude for differentiation."

U.S. carriers, for example, have been slow to offer WiFi services for fear of cannibalizing their cell phone business. Dayton said SK-EarthLink doesn't see WiFi as a threat and will move aggressively on fronts carriers have chosen to ignore. Customers, for instance, might use SK-EarthLink mobile phones inside their houses (where cell signals are notoriously weak) to tap home WiFi networks for voice calling over the Internet. "Now you can make phone calls without using up your minutes," he said.

It remains to be seen whether the mobile Internet will turn out to be the lifeboat that rescues EarthLink from steady defection of its dial-up subscribers.

Leslie Walker's e-mail address is walkerl@washpost.com.


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