When AltaVista announced “free” unmetered access earlier this year, there was considerable media hype surrounding its package and the “free” offers of other Internet service providers (ISPs). It was at this stage that I went on record with my reservations (MW March 9), and they now seem well-founded.
When AltaVista launched, 500,000 users reportedly registered their interest. Six months on, the company claimed more than 100,000 customers had signed up. But now, following growing media scepticism, the company has come clean and admitted that its service never got off the ground. AltaVista feels it’s not a financially viable offer.
NTL also launched a free unmetered service in April, but has now restricted the distribution of its CDs and the Advertising Standards Authority has apparently received 144 complaints from would-be customers.
One of the usual problems associated with these “free” unmetered ISP services is poor connectivity, as costs are managed by putting as many connections as possible through one port. This also means you cannot download video, music or chat because of the restricted bandwidth. Other associated caveats include changing phone companies, buying special cable boxes or giving up part of your screen for advertising.
Some ISPs have had to take drastic action. Breathe reportedly had to ban its top 500 users from its unmetered service because of heavy usage. Line One and many others have now withdrawn their services and others, such as Virgin Net, have delayed their launch.
The “Surftime” package is available from BT for &£5.99 a month for unlimited access at evenings and weekends, but what BT doesn’t state clearly in its advertising is that you also have to sign up to a participating ISP. Indeed, many of these participating ISPs make a charge for their service on top of the “Surftime” charge.
For example, the cost of free surfing at evenings and weekends with BT Internet is actually &£9:99 per month – &£5:99 for the “Surftime” charge and &£4 for the ISP charge, plus you still have to pay local call rates for all your surfing at peak times. On average, Waitrose.com users spend &£6.50 a month on evening and weekend Net calls, so many users would be worse off if they signed up to one of these services.
There are therefore two points I want to make: firstly, you don’t get something for nothing. In the US you pay for your Net service but local calls are free – AOL’s standard plan is $21.95 a month (&£14.63). In the UK, because of the way our telecom industry is structured, the reverse is true. So if someone kept their PC online for a month, the phone bill would cost about &£900.
If calls are unmetered for a fixed fee, someone has to underwrite that risk. No revenue from advertising or commission on sales can fund that shortfall, nor can it be written down as an acquisition cost. ISPs are aware of these issues and are finding it difficult to recover their costs from unmetered access.
A typical ISP may receive a flat monthly payment from its customers, but it has to pay the cost of its customers’ Net access by the minute because ISPs are unable to buy Net connections wholesale from BT.
Although the “Surftime” solution is on offer, many ISPs have rejected it as it can be too confusing to explain, too difficult to manage and too expensive. All of this means that if you want to launch an unmetered service, you have to compromise on the quality you offer.
From early next year, BT will be obliged to offer other telecom carriers access to its exchanges so that an alternative to the BT network can be created. It’s that which will change things for everyone. But those wanting a high-quality service, including fast and reliable connectivity and access to all Net services, together with light users, will probably be better off sticking with metered calls for the time being.
Which brings me to my second point. It seems that if you are a new e-commerce business, you can promise the world, get huge publicity then not deliver. Those of us in the old economy simply can’t do that – we have customers that trust and rely on us for good service and sensible advice. New Net businesses wanting to build that trust run the risk of being discredited by the excesses of others.
I fear that the sophistry surrounding Net access will make it no more straight-forward for consumers than mobile phone tariffs.
But perhaps the industry thinks it can thrive on that kind of confusion.
Mark Price is director of selling and marketing at Waitrose