Breathe back to life

Breathe axed its service in December

By BBC News Online's Orla Ryan

Internet portal Breathe plans to relaunch its unmetered internet access service in early April.

The company is expected to charge about £15 a month to subscribers.

Last year it axed its unmetered internet access service as the company ran out of cash, but it was later rescued by retail giant Great Universal Stores.

We are certainly not the only ISP to have had a problem with an unmetered scheme

Breathe's Sean Gardner

Two months on, Breathe now remains confident that it can resurrect the service, despite the fact that it may have alienated the thousands of surfers who lost their one-off lifetime fee of £50.

Having gone into administration, only to be recued by GUS, the company is pitching itself as a dot.com survivor.

Despite its traumas of the last few months, it is still optimistic that it can be a top 20 portal and a top five ISP within the next 12 to 15 months. It also plans to continue its heavy advertisement spend.

Back of the queue

Many of Breathe's one-time subscribers are now talking to the administrator about a refund, though they are thought to be at the back of the creditors' queue.

Breathe is only one of several ISPs to have problems delivering an unmetered internet access service.

Many of them have blamed BT for the rates it charges ISPs, though the telecoms giant has since introduced a flat-rate fee.

"It is a good and economic way for us to acquire subscribers," Breathe director Sean Gardner said of an ISP service, with the clear intention of selling goods and services to these subscribers.

But he admitted they may have to do some work to regain consumer trust.

"There has to be an effect. It would be naive of us to say there hasn't been one. At the same time I don't think the effect has been great... We are certainly not the only ISP to have had a problem with an unmetered scheme. It is a problem for the industry... rather than just a Breathe issue," he said.

Since last year, Breathe's subscriber base has grown sixfold to 600,000. About 90,000 of those have been gained since mid December, when it shut its ISP service, Gardner said.

Cash flow

Breathe's ISP problems were exacerbated by the fact that late last year, it ran out of cash and its investors got cold feet.

It got likened to a goldrush and I guess that is what it was

Breathe's Sean Gardner

Last year, Breathe got through the £20m provided by its investors, spending £4.2m of this on advertising.

The company is thought to have hit its targets, but its original investors failed to agree a bridging loan to see the company through to its next phase of investment.

The management team did consider a buyout and is thought to have got together enough cash to secure the company's future, when GUS made the phonecall offering to step in.

GUS - known in the UK primarily for its Argos brand - became one of the first bricks and mortar companies to buy a struggling dot.com. The move allows GUS to leverage its internet offering relatively cheaply, using the mobile internet and voice-activated technology Breathe developed.

The future is now different for Breathe because "rather than a bunch of people who invest money to make a quick return which is the nature of entreprenuers and venture captialists, I guess we have a business now that is maybe taking a longer-term strategic view," Gardner says.

Who's to blame?

Conventional wisdom blames the high-profile demise of some dot.coms on the reckless spend of enthusiasts who forgot they had to make a profit.

Breathe's Sean Gardner says the spending isn't necessarily the issue - but the attitude of investors who jumped in for a quick buck was.

"Everybody got caught up in the excitement of what was a growing and therefore opportunistic business. It got likened to a goldrush and I guess that's what it was," he said.

"Investors were quick in and quick out. That isn't necessarily overly responsible. There was insufficient due diligence at time the investment was made. The natural outcome of that is that there are going to be failures which are very public," he said.

But the dot.com business model is not to blame, he says. "The thing that doesn't work is the investment process," he said.