Traditional ISPs in the UK were dealt another blow yesterday when the Toys R Us chain said it was launching a free service offering customers five email addresses and 10MB of free web space. And other retailers are reported to be planning further launches as they try and emulate the success of electrical retailer Dixons Plc which became the UK’s largest ISP, attracting 900,000 customers to its Freeserve service after just three months in operation (CI No 3,575). What troubles the traditional ISPs is that the free services are now being offered at the places where new users are most likely to buy their first PC. So companies like AOL – pushed into second place by Freeserve’s success – not only have to persuade users to switch ISPs but to start paying for a service they have enjoyed without charge. Toys R Us is offering its service through Virtual Internet Provider, a company set up by Cisco Systems Inc, ICL Plc and Cable & Wireless Communications. Meantime, Dixons expects to break even on Freeserve in the current financial year. With analysts valuing Freeserve between 1.7bn pounds and 2.5bn pounds, Dixons announced yesterday it was to be spun out as a separate company, fueling hopes that it would eventually be floated on the stock market.
