By Kevin Murphy
One year ago, UK retailer Dixons Group Plc launched what it called free internet access with Freeserve, and revolutionized the internet service provider market by offering what every other ISP in the country was offering, but without the monthly subscription charges. Now that almost every ISP uses Freeserve’s business model, the scene is set to be turned on its head yet again, with the launch of CallNet0800, an ISP that claims it will offer internet access with no subscription fees and, importantly, no call charges at any time.
Twelve months and four phone bills after Freeserve’s launch, the UK consumer has realized free was not entirely accurate, and that a 10 pound ($16) per month subscription fee paled into insignificance against the potentially massive increase in telephone usage. British people are still billed by the minute for their local calls, and Freeserve and its imitators subsidized their services by taking a percentage of these charges. Many people are now looking to US-style unmetered local calls as the answer to turning off the internet clock. Some even took up the opportunity to pay 50 pounds ($80) per month for 24/7 unmetered access via a toll-free number when it was offered by startup 08004U Ltd last month.
Now CallNet reckons it can provide toll-free access to the internet at any time with no need to pay a subscription. And, unbelievably, there are no noticeable catches. Many ISPs that offer limited, usually off-peak, unmetered net access require the user to change telephone companies or sign up to minimum paid usage deals.
CallNet has teamed up with Canadian carrier North American Gateway, which will provide the network for the service. In addition to e-commerce revenues taken through the CallNet site, NAG expects users of the ISP to make their voice telephony calls using its network, by dialing a code prefix on telephone numbers. The company says these calls will be charged at a 30% cheaper rate than British Telecommunications Plc’s standard tariff but that users don’t have to use it if they don’t want to.
This gives the service the appearance of a huge loss-leader – NAG reckons it can take on BT’s dominance in the UK telephony market by enticing users with this sweetener. Whether the business model proves to be viable remains to be seen. CallNet says it expects to have 200,000 users by Christmas and, on the face of it, seems likely to be the next Freeserve. Imitators are certain. Today, carrier Telinco will announce the launch of its own 24/7 unmetered ISP, StrayDuck.com, but how the service will be paid for is still a mystery.
Some might say that the advent of free unmetered internet access in the UK could force BT’s hand to reappraise its own pricing structure. Not so, according to the Campaign for Unmetered Telecommunications. Erol Ziya from the rapidly-growing lobby group said: BT will still accrue revenue through this service. As long as they do so, they have no reason to go unmetered themselves. The service will abrogate BT’s responsibilities and subsidize its outrageous costs. BT owns over 80% of the first-mile/last-mile local loop in the UK, and will therefore receive a per-minute fee from NAG for use of the service. No matter how long it takes for CallNet0800 to become profitable, BT will be making money from the first dialup.
London-based CallNet is a little over a year old and is traded on the New York Over-The-Counter stock exchange. The service commences on November 1.
