Altavista UK has confirmed that it never launched its much-hyped service to give users unmetered internet access.
The service was due go live in June, but the company now says it was never turned on.
The company says it was defeated by the economics of the UK telephone market.
It is advising the thousands of people who signed up for the service to opt for one of its other offers. These either restrict how long users can stay online, or ask them to pay their telephone charges.
Indefinite delay
In March this year Altavista promised to change the way people used the internet in the UK by launching an unmetered surfing service.
Anyone signing up for the deal would pay a low annual or monthly fee for their net access and would never have to pay call charges again.
In June, when the service was due to be switched on, Altavista announced it would then be charging £60 per year for the service and was restricting the numbers that could sign up.
In July, an Altavista spokesman told BBC News Online that the service was up and running, although he declined to say how many customers were participating in what he called a "controlled roll-out".
Now the company says it had to delay indefinitely the launch of the service as the economics of the UK telephone market meant it just could not be made to work.
A spokesman said until the situation changes Altavista UK would not be offering an unmetered service.
Charges change
Companies struggle to make money out of the unmetered services because, although surfers pay next to nothing, ISPs have to pay network provider British Telecom the full telephone bill.
Later this year, a new charging regime will be brought in, which is set to change the situation.
Known as Friaco, for Flat Rate Internet Access Call Origination, this charges ISPs for the number of lines they take from BT rather than the amount of traffic flowing over them.
"Until the flat rate circuits are available in mass market quantities, neither we, nor anyone else, will be able to offer an affordable or economically viable service," said an Altavista spokesman.
He said he had sympathy with consumers keen to use the service but added: "The alternative was to open the floodgates and then be unable to fund the service 30 days down the line."
Prior to the service being switched on, 500,000 people expressed an interest. But actual users of the much hyped service turned out to be hard to find.
Campaigns and searches by national newspapers, internet magazines, online news sites and ISP chat sites ISPReview and Net4Nowt failed to find a single subscriber.
Now the reason has become aparent: the service was never switched on and no-one was invited to use it.
Unmetered offline
In the past month, two companies, LineOne and CallNet 0800, announced they had to stop offering unmetered services, arguing the business was not viable.
Companies still taking on subscribers - which include Breathe, RedHotAnt and NTL - are restricting the numbers that are signing up in an attempt to keep the service manageable.
Despite the problems there are still many ISPs offering unmetered access. To offset the cost of providing the service, most charge monthly fees or require people to make a certain amount of voice phone calls per month.
The collapse of unmetered services by well-known companies is having a knock-on effect. Last week Freeserve said that its network is starting to getting jammed as people subscribe to its unmetered service.