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AOL Europe vs. Freeserve (A)

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AOL Europe must decide how to respond to Freeserve, a free Internet Service Provider (ISP) that has signed up 1.6 million British customers in its first six months. After becoming the leading ISP in the United States, AOL has formed a joint venture with Bertelsmann to expand into Europe. By early 1999, the new company, AOL Europe, has 2.6 million subscribers, but it has fallen behind the market leaders in Germany, France, and now, the United Kingdom. This case asks how AOL Europe should respond to the Freeserve challenge and provides information on the economics of ISPs, AOL, Europe's history and growth, and the U.K. regulatory environment to help students frame their responses. A rewritten version of an earlier case.
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