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Tuesday, 18 July, 2000, 15:30 GMT 16:30 UK
Unmetered web access in trouble
UK internet service provider LineOne has withdrawn its offer of unmetered web access, saying the service is not commercially viable.

Internet service providers (ISPs) offering unmetered web access typically try to make money by either charging a flat rate or by forcing users to subscribe to access telecom services.

LineOne was caught out by a small number of users who kept their computers connected to the web 24 hours a day, seven days a week, running up huge phone bills.


Since we introduced the LineOne free internet calls offer with Quip, the response has been overwhelming... much more than our original expectations

LineOne
The firm's trouble is a stark illustration of the problems facing ISPs in the UK, who find themselves trapped between the stranglehold of BT on much of the phone network and aggressive marketing from large rivals who drive down access prices.

A deal falls apart

Subscribers to LineOne's unmetered web access service had to sign up with start-up telecoms firm Quip and spend at least 5 a month on telephone calls to qualify for free 24-hour web access.

The revenue model works if web usage is moderate and customers spend a fair amount of time on the telephone, making and paying for voice calls.

However, a small but significant number of users kept their computers connected to the web all the time.


This is a revolutionary phase in the development of UK web access and casualties are to be expected

Andy Mitchell, AltaVista UK
To thwart them, LineOne - like other ISPs - had set a maximum connection time, and a short "time-out" before users could reconnect.

But these users then installed programmes on their PCs that automatically reconnected them to the web, as soon as the time-out period was over.

In the end, about 10% of users accounted for more than 40% of all internet traffic, at too high a cost for LineOne and its partner Quip.

Subscribers to the service will be able to use it until 1 September. Then they will receive free voice calls worth 20, which makes up for the price of a special access telephone dialler that connects them to Quip.

Keeping costs under control

LineOne was among several ISPs offering unmetered access. BBC News Online polled a selection of firms still offering the service, and all insist they are coping with demand.

The secret of their success: The service is not really available to everyone.

Unmetered access providers
AltaVista UK
NTL
Telewest
RedHotAnt
Virgin.net
Freeserve
Zoom
X-Stream
BT Surftime
Tiny Online
LibertySurf
The Free Internet
(selection)
ISPs watched closely the experience of small rivals like Kent-based RedHotAnt, the first non-telecoms firm to offer unmetered access, which saw its service swamped by users.

Servers were strained past breaking point and many users were unable to log on for hours.

RedHotAnt's Bob Garrioch says it was a Catch-22 situation. Once users got online, they stayed online and clogged up the network for fear of not getting on again later.

When firms like AltaVista UK, Freeserve and Tiny Online rushed to announce their own unmetered access offers, they were all careful to have a "controlled roll-out", strictly limiting the number of new subscribers.

At cable firm NTL, for example, users have to wait "a couple of months" before getting the 'NTL World' internet access software - despite the fact that NTL actually owns the network to run its internet traffic.

Other ISPs are even more vague about waiting times.

And it is striking that only one ISP contacted by BBC News Online was prepared to offer subscription figures.

It seems that nobody wants to be seen without an "unmetered access model", but few actually make it broadly available.

The exception is BT, which is pushing hard its "Surftime" package for internet access. But then BT owns most of the UK telecom network.

It is also significant that few ISPs have taken up BT's offer to participate in the Surftime scheme.

Business models

Until a year ago, most European web surfers had to pay twice for their internet access - a fee to their ISP and the cost of a local telephone call each time they logged on.

Then UK firms like Freeserve and a raft of imitators dramatically cut costs by offering "free" internet access.

They made money by teaming up with telecom providers and earning a share of the local call charges that users still had to pay.

This business model is on the way out though, as internet users demand flat rates and truly unlimited web access.

Andy Mitchell of AltaVista UK calls it a "revolutionary phase in the development of UK web access".

But ISPs are struggling to meet the demand.

As long as BT controls the "local loop", the last link from the network to a phone or modem, and insists on metered access, it hardly pays to offer unmetered web deals.

Phone regulator Oftel has weighed in and told BT to offer its rivals deals for Flat Rate Internet Access Call Origination (Friaco).

This did not help LineOne - even though both the ISP and its telecom partner Quip were 50% owned by BT.

As long as Friaco is not "available and useable", ISPs will have to bridge "this unfortunate gap with interim solutions", says Mr Mitchell.

For now, it is certainly not making anybody any profit.

Freeserve describes the service as a "loss-leader" for its e-commerce operation. RedHotAnt says the economics are "very tight".

Millions of UK web surfers, meanwhile, are kept waiting for the day when free internet access is truly free.

Links to more Business stories are at the foot of the page.


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