News Burst: Questions remain over AOL Flat Rate

Other ISPs don't understand how AOL will make it work, but analysts think a price war could be on the way

AOL's "Flat Rate" offering opens a new era for unmetered Internet access in the UK, according to industry experts, but questions remain as to whether AOL will make the unmetered model work.

At £14.99 per month, the consensus is that AOL Flat Rate is going to be popular. James Eibisch, research manager at IDC, thinks the company has made a wise move. "This is a sensible decision by AOL. They don't need to spend money building a brand, and I think this will be popular with many people," he said.

There is still confusion as to how -- or whether -- AOL's new service will be profitable. Other ISPs have revealed to ZDNet that they've not been able to get hold of a wholesale, flat-rate Internet access tariff, and are therefore not in a position to offer unmetered Internet access to their members.

BT was forced to offer Flat Rate Internet Access Call Origination (Friaco) in May. According to AOL, the Friaco rollout is set to accelerate in the coming weeks.

Analysts expect that other companies may undercut AOL's unmetered access service. As with the mobile phone sector, they expect pay-as-you-go services to remain popular with low-usage customers.

Full story to follow.

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