AOL's system became just too busy for some customers since the company recently began providing unlimited time on the Internet for $19.95 a month, the local firms say.
At Pacific Information Exchange Inc.'s new high-technology headquarters in the Harbor Court building in downtown Honolulu, vice president John Strom said the company has had a major influx of new customers for its Pixinet service.
"We have a flood of AOL customers because they can't get on-line in Hawaii. The local Internet service providers are benefiting greatly because they (AOL) oversold their service," he said.
Local providers say, however, that they don't see themselves getting jammed up and aren't likely to abandon their own flat-rate policies in the near future.
AOL's problems have led to national speculation that the rapid growth of Internet use may lead to big providers shifting to some form of time charging rather than allowing customers full-time access for a flat rate.
A Wall Street Journal story two weeks ago, citing changes by two major national Internet connection providers, said the era of unlimited service for $19.95 may come to an end in 1997.
America Online today said it has been signing up new customers at such a rapid rate that it does have some busy periods but is working hard on the problem.
The company was already growing fast when it went to the $19.95 flat rate for unlimited use on Dec. 1, said company spokesman, Stephen Sigmund, in New York.
AOL hasn't released membership numbers for the last quarter but is "comfortable" with analysts' estimates of 800,000 new customers in the last three months for a total of more than 7 million, he said. "We already have increased our system dramatically and we will continue to do so."
Cory Kimura, president of Kestroke Communications Inc., a Honolulu Internet provider, said his company has thought about shifting from a flat rate to a use-charge structure but doesn't see the need for it now and competition won't allow it anyway.
"All the big players that have come into the local market have all gone the flat-rate way. I think that will keep the local competition to the flat rate for some time," he said.
Pacific Information Exchange's Strom said there is some truth to what some national providers are saying about the bottom line, that providing unlimited access for under $20 a month could get them in financial trouble.
"Everyone right now is operating on such a thin margin to provide rates that will be competitive against the AOL's and the AT&T's and so on," he said.
One answer will be to provide unique services and "add-ons" and charge extra for them, he said, but for now his company is sticking to the flat rate and moving to new technology to improve its service and hold the line on costs.
"Over the last week or two there's been a complete migration from America Online," said Kit Grant, marketing manager of another local provider, LavaNet. She said her company did not go to the $19.95 rate, however, insisting that it can better serve customers with higher fees, $24.95 a month.
"We had our share of calls asking, how come you're charging $5 more than the others," Grant said. LavaNet spends a lot of time explaining to people that it can guarantee they won't get busy signals and they will get top-quality service, she said.
Rob Volker, vice president and general manager of GST Telecom Hawaii Inc., owner of Hawaii OnLine, said his company still has lots of capacity and won't get jammed up the way America Online did, despite offering unlimited access for $19.95 a month.
His company has not experienced any congestion because of its flat-rate, unlimited access policy, he said.
Several major providers already have abandoned the $19.95 strategy. In December, Netcom On-Line Communication Services Inc., with more than 500,000 customers, announced plans to scrap its $19.95-a-month plan. CompuServe Corp. folded its WOW! unlimited-access service in November and vowed to stick with hourly charges for its main service. Now Sprint Corp., which began offering its $19.95 Internet access in November, is considering higher charges for heavy users.
So far, such powerful providers as AT&T Corp. and America Online say they have no plans to drop the $19.95 service.