FRANKFURT -- Internet service provider AOL Europe called on the German government and former phone monopoly Deutsche Telekom on Thursday to cut the cost of Net access and unlock the growth potential of the online economy.
AOL Europe, the continent's second biggest ISP, said a 20 to 50 percent reduction in call charges for Internet services would swell German economic output by 0.5 percent -- a tidy 19 billion marks ($9.6 billion) -- and create up to 400,000 new jobs in a country plagued by high unemployment and a sluggish recovery.
Charging Internet users by the minute was preventing Germany from enjoying the economic boost seen in the United States, where flat-rate access fees mean users spend up to six times as long online as their European counterparts every day, AOL said.
"More use means more e-commerce," AOL Europe chief executive Andreas Schmidt said, pointing to a jobs explosion in the United States because of the burgeoning success of online retailing.
But more importantly it also means a more productive economy, if sages who credit an Internet boom with driving the longest peacetime expansion in U.S. history are to be believed.
A study commissioned by AOL Europe, whose 3.8 million subscribers in nine countries include 1.5 million Germans, highlighted flat-rate Internet access as the next target for Americanization of German business after Vodafone's bid for Mannesmann brought hostile takeovers to Germany.
AOL likened the Internet's growth impact to the economic "miracle" which turned a virtually ruined Germany into the world's third largest economy in the years after World War Two.
"The Internet can bestow a second miracle on Germany and in the short term lead to a radical reduction in unemployment," Schmidt said after publishing the study into flat-rate charging.
"The Internet is the job machine of the future."
It sounds an attractive prospect for Chancellor Gerhard Schroeder, who staked his political future on a pledge to cut jobless levels but has watched unemployment stall stubbornly at around 10 percent and far higher in the former Communist east.
AOL urged him to follow British Prime Minister Tony Blair, who has sought to extol the virtues of a less regulated economy to the German chancellor, in giving online growth a kick start.
"The higher the prices, the lower the levels of Internet use," said the study, conducted for AOL -- a 50-50 joint venture of America Online and Bertelsmann AG -- by the European Institute for International Economic Relations.
A comparison with nine other EU countries showed German off-peak tariffs were the second highest of those studied.
Germany's telecoms regulator said last month 20 million of the country's 82 million inhabitants would have Internet access by 2001, though analysts doubted whether the undeniably fast-growing German market could grow 67 percent on the year.
But a price slash, which the regulator said would drive rampant growth in German mobile phone use this year, could help confound skeptics and boost Internet access, the study said.
Flat-rate access could only be delivered by Deutsche Telekom AG, in which the government holds a majority stake, but the German telecoms regulator could order it to act.
As Germany's dominant network operator, Telekom retains a virtual monopoly on local phone calls through wholesale prices, AOL said. AOL wants to see a fixed rate fee for customers using the Internet for more than a set amount of time each month.
The change was technically possible, the study said. It just needed voice and data calls to be split at local exchange level.
The introduction of a flat-rate charge in the United States trebled the average time spent online by AOL subscribers to more than 30 hours a month, AOL Europe spokesman Frank Sarfeld said.
With the average German using AOL for 12 hours each month, paying 3.9 pfennigs per minute, Telekom had room to introduce a 40-mark flat-rate fee while boosting average income 30 percent.
"We're not asking Deutsche Telekom to give away the flat rate for free," Sarfeld said. "They could even make money."
But industry sources say the government is unlikely to demand something from Telekom, which could hit the group's share price just months before a planned third wave of privatization.
Telekom said it had plans to cut tariffs on 1 March, but declined to give further details.
