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The official reason is that the nature of AOL subscribers has changed with today's customers being much more knowledgeable than at the height of its expansion in the mid 1990s. As a result, calls to the centres have fallen by as much as 50 per cent.

Nevertheless, the board of Time Warner had to do something to stem the tide of red ink on the AOL balance sheet. The company's recent quarterly results revealed that the ISP lost another 865,000 subscribers, representing another four per

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cent drop in just three months, as customers move from AOL's traditional strength in dial up towards broadband services that the ISP no longer provides in the US.

The current number of subscribers is now 18.6 million, down from its peak of 26.7 million in September of 2002. Although AOL is lauding today's more technical user, the drop in subscribers is just as likely to have led to the redundancies.

At the same time the company is trying to re-invent itself away from being a 'walled-garden' ISP and towards becoming an online services provider along the lines of Yahoo and Microsoft's Windows Live. AOL has been positioning itself to take advantage of its parent's huge content library as well as developing its own VoIP services.

In addition, the recent deal between Google and Time Warner means that not only did the company get a $1 billion cash injection it also gained the right to sell its own keywords through the AdWords service. Last quarter, ad revenues from its 'free' services grew by 26 per cent.