AOL and Freeserve draw battle lines

So begins the battle of the ISP business models

The battle of the ISPs was played out this week, as AOL and Freeserve shared a stage at the Jupiter Consumer Online conference in London.

The two players stepped up to the podium to take questions from the audience on the future of the UK Internet access market. Since the arrival of Freeserve over 200 free access ISPs have launched here with the maverick business model copied across Europe.

Subscription-based services -- most notably AOL which launched a scathing attack on BT Tuesday -- claim that free is not free as users still have to pay for telephone access and argue that these charges are holding back Internet take-up. AOL, the world's largest ISP, argued that usage is key to bringing consumers online and unmetered access is vital if that is to be achieved.

Bill Burrington, senior vice president of AOL Europe, put the AOL case. "We have found that 92 percent of users would stay online longer if access costs were reduced. It is the cost of telephone calls keeping them away," he said. Burrington laid down a challenge to Freeserve. "Most free ISPs won't be around in a year or two. Freeserve and the others have to wake up to that," he said.

Mark Danby, managing director of Freeserve denies Burrington's predictions. "Usage is the same on AOL as on Freeserve. It is quality of services which will drive online time," he said. Gregory Sukornyk technical manager of of free ISP X-stream goes farther, sounding the death knell of subscription services. "Subscription-based access is going the way of the dodo," he said.

But Burrington points to his company's experience in the American markets where it has experimented with various price models. "We raised subscription charges and usage continued through the roof," he said. AOL UK recently introduced a flat-fee access charge of one pence per minute which Burrington siezed as an opportunity to attack Freeserve. "We have done the sums and users of Freeserve are paying an average of £40 per month compared to £28 per month for access to AOL."

Danby did not challenge the sums but later declared them to be "complete tosh". He claims the revenue for Freeserve from telephone calls would only account for 20 percent of its earnings by 2003.

Freeserve is currently trialling ADSL services and Danby is keen to "be a leader in that market". ADSL users will pay a flat monthly fee for the service, although prices are yet to be decided.

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