Australian free ISP's: are they dead?

With the demise of Globalfreeway this week, the collapse of Free Net last October and a move towards fees by the remaining few, where is the free ISP model heading in Australia?

Are Australian free ISPs heading for the grave?

"No one sees it as a threat anymore, they're dead," analyst Richard Gillis said.

According to Gillis, the free ISPs position in the market has been viewed as a secondary ISP, used by customers as a backup service to ISP's such as BigPond, OzEmail and Optus@Excite.

"They are just a backup if something happened with the primary ISPs," he said.

Gillis says free ISPs are now focusing on other revenue streams rather than just advertising models and moving gradually to a pay-for-service model.

"The free ISP model has had its day," he said.

"You can provide a free service, but how much money are you going to burn along the way because of the advertising model. User bases of free ISPs is not a particularly attractive market."

The last surviving free ISPs in the country include GoConnect, Free Online and smaller ISP, Free2Air.

"With Free Online, the part of it that's free is minimal," Gillis said.

One source - who preferred to remain anonymous - told ZDNet Australia that Free Online's customer base dropped from 120,000 users to 80,000 in just four months.

Free Online was unavailable for comment.

Brave face

However, one survivor of the free ISP downturn, GoConnect - which has a customer base of 130,000 in metropolitan Sydney, Melbourne and Brisbane - believes the future is rosy for free ISPs.

"We're always examining different business models, but at this point in time there is no plan to go to a paid service," GoConnect Managing Director, David Tan told ZDNet Australia.

GoConnect draws on TV advertising, rather than banner ads, for revenue, using GoTrek technology which delivers interactive video over narrow band connection.

However, GoConnect told ZDNet Australia the service is not taking anymore customers at present as they are restrained by capacity.

"We don't discount that we will be open for more memberships in the future," Tan said.

Gillis believes Free Online and GoConnect are focusing on other revenue streams, as "it's not getting any cheaper to run these types of services."

"The quality of the network has decreased as the subscriber base gets higher and capacity is overloaded. This is the main cause for performance degradation," he said.

Another free ISP, Free2Air, refutes the claim that the free model is dead.

Managing Director James Young told ZDNet Australia, the free ISPs who have faced difficulties existed on a flawed model.

"The ones which will survive are those who cater for the average user, not the heavy user, as cost structure per customer becomes enormous."

"We encourage average users and keep out the heavy users," he said.

Free2Air has a smaller customer-base compared with GoConnect and Free Online, with 8,000 regular users.

Young believes Globalfreeway's downfall was that the cost structure per customer was unsustainable, with each user costing an average of AU$40 per month.

"We cater to 95 percent of users which use on average 30-36 hours a month, high end users - which we exclude - can be online constantly," Young said.

Free2Air also has a paid service model, using the free service to attract its customer base.


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