Cheaper Net access, more casualties?



Whatever Tony Blair wants he gets. So after his call for the UK to have unmetered access to the Internet, it is no surprise that it is happening. Alta...



Whatever Tony Blair wants he gets. So after his call for the UK to have unmetered access to the Internet, it is no surprise that it is happening. Alta Vista, NTL and BT all announced variations on unlimited access to the Internet at prices which, it is claimed in some cases, make it cheaper to surf the Internet in the UK than in the US.

This is good news for consumers and business users of the Web and for some dotcoms, who can expect a greater flow of traffic through their sites. It's not so good if you're an Internet service provider or the type of dotcom that relies on taking a slice of telecommunications revenue. The arrival of unmetered access threatens ISPs like Freeserve, whose business is built on offering "free" access to the Web while taking a percentage of telecoms charges from their customers.

If this revenue disappears, many ISPs will be left to survive on their advertising and e-commerce income, which calls into question current stock market valuations for ISPs. Freeserve, in particular, has suffered since this announcement, losing 29% of its value in recent weeks.

If, as Blair hopes, unmetered access increases Internet usage, this represents a huge opportunity for the growth of business to consumer e-commerce. The problem is that all the deals announced this week have unattractive elements to them, such as high up-front or ongoing costs. BT will charge £15.25 a month for unmetered access in the evening and at weekends and £29.95 for unlimited access at any time.

With Internet access through fixed lines effectively free, the pressure is really on for providers of mobile devices to ensure they keep their charges low. Otherwise users could vote with their mice and minimise their use of the Web outside the home.

Key to whether this happens will be the quality of content available on mobile devices. BT is also investing heavily here, announcing partnerships with 30 content providers to enable customers to receive, for example, real-time share prices through their mobile phones. But it is early days for WAP revenue models and it remains to be seen who will be the biggest winners.

Ian Mitchell is an ITanalyst with stockbroker Beeson Gregory. His opinions should not be construed as investment advice.

This was last published in March 2000

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