Double trouble for AltaVista's UK ISP

The Internet portal and ISP is slapped with a breach of contract lawsuit on the eve of its flat-fee Internet access launch in the United Kingdom.
Written by ZDNET Editors, Contributor on
LONDON -- An Internet-service provider is suing portal site AltaVista Co., claiming it breached an agreement for the two companies to jointly provide flat-fee Internet access in the United Kingdom.

The New York-based Free Internet Group claims AltaVista, a unit of Andover, Mass., Internet conglomerate CMGI Inc. (cmgi), signed a contract with it on Feb. 29 to use its network to provide consumers with Internet access.

In a suit filed in a London court Thursday, Free Internet is seeking to revive the agreement, the names and e-mail addresses of the consumers who have signed up for the service and $15,000 of reimbursement for the cost of a mail server.

If the suit fails to revive the agreement, Free Internet is seeking 200 million pounds ($303 million or 316 million euros) in damages from lost income, anticipated publicity, and increased market profile that would have come from being the technology provider to AltaVista's flat-rate access in the U.K.

David Emanuel, AltaVista's head of public relations in Palo Alto, Calif., said the company reviewed the complaint late Thursday.

"It has no merit and reeks of a company desperately seeking attention," Mr. Emanuel said. "We have no obligation to them."

Mr. Emanuel said AltaVista never finalized an agreement with Free Internet.

According to the suit, the agreement broke down in early March, when AltaVista "raised various queries ... as to technical matters." Free Internet claims it dealt with the queries and "made all appropriate adjustments."

On Monday, AltaVista said it would work with another partner, British Internet-service provider Claranet Ltd., to launch a flat-rate service June 30. The service will cost 51 pounds a year.

AltaVista, known best for its search engine, is trying to remake itself in Europe as a provider of cheap Internet service. It announced plans in March to offer flat-rate access, though it won't be ready to roll out the service until late June. It also plans an initial public offering for its European operations later this year.

The Free Internet suit could be a setback for AltaVista, which has been criticized for announcing the service so many months before it was ready to launch. Rivals complain that the announcement, which was timed to upstage similar offers by cable company NTL Inc. and Excite@Home Corp. (athm) days later, was a public-relations stunt.

Under the contract Free Internet says it signed with AltaVista, Free Internet's sister company, Business Online, would have been the "virtual," or background, provider of telecommunications services to AltaVista.

A person familiar with Free Internet says Business Online was all ready to roll out the service in March, but that CMGI wanted to delay the service's launch until June.

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