America Online has long counted its subscribers by the million; now it seems it can count defections by the same yardstick.

Reports citing the ever-anonymous “sources familiar with the figures” claim the ailing internet service has lost over one million dial-up customers since its subscriber downturn began towards the end of 2002.

Speaking at a conference this week, AOL Time Warner chief financial officer Wayne Pace admitted customer desertions at the online unit had been greater than anticipated, leaving heavy cost-cutting as the only way it can reach cash-flow targets.

AOL’s problems appear to be twofold. First, dial-up customers are switching to budget internet providers such as NetZero and Juno (both owned by United Online). These offer access for a fraction of AOL’s $23.90 (€20.43; £14.65) a month. Second, subscribers seeking to upgrade to broadband connections are doing so direct from cable and phone companies that do not deal with AOL. As a result, AOL’s growth in the high-speed market has been slow.

First Albany analyst Youssef Squali estimates that around half of AOL’s recent customer defections are due to broadband upgrades, with about 20% reflecting desertion to a cheaper operator.

Despite such falls, AOL remains the nation’s biggest ISP with around 26 million subscribers.

Data sourced from: The Washington Post Online; additional content by WARC staff