Internet supplier denies customer-retention ploy

The chief executive of internet provider Biscit/V21 has accused former supplier NetServices of cutting off V21's service in a bid to hang on to its dwindling customer base.

In mid-November, V21's customers found that they had been disconnected from their ISP and routed through to a page which urged them to sign up with another customer of NetServices, EzeeDSL.

ezeeDSL — also known as 186k — had only become a familiar name during the preceding few months, after customers of the NetServices-supplied ISPs E7even (in July) and Fast24 (in November) were faced with disconnection unless they signed a new 12-month contract with ezeeDSL.

Ofcom used the conduct of NetServices as a prime example of why it should be able to enforce the issue of migration authorisation codes (MACs), which it says customers should be given without obstruction so they can switch internet providers freely. NetServices claimed it was unable to issue MACs to frustrated ex-customers of E7even, Fast24 and V21 due to issues of confidentiality.

After NetServices cut off V21, claiming it was owed money, V21's relatively new owner Biscit — which only bought it in October — decided to sue NetServices for an undisclosed seven-figure sum.

Biscit's chief executive, Hugh Paterson, told ZDNet UK on Monday that he had been contacted by NetServices during the period of "due diligence" that occurred as part of Biscit's acquisition of V21, to say that Biscit could expect a "burst bandwidth" invoice for more than £200k of unpaid charges. Paterson claims that he had agreed on the condition that it was a "proper invoice".

However, after the sale went through and Biscit received NetServices' invoice — which covered the period back to December 2005 — Paterson claims the ex-directors of V21 informed him that NetServices had not had the technology to measure "burst bandwidth" until July 2006, suggesting that the invoice had been an estimation. "Quite clearly you just reject [such an] invoice," Paterson said.

Biscit/V21 has since been auditing previous invoices received from NetServices, although it is as yet unclear as to whether Biscit might be seeking further repayments on the basis of these.

V21 had represented about 20 percent of NetServices' total custom, which is thought to number around 50,000 subscribers signed up to its resellers. However, V21's new owner, Biscit, has its own deal with BT Wholesale and is effectively a competitor to, rather than a potential customer of, NetServices. It is thought that Biscit would in fact have transferred V21's customers from NetServices to its own pipes.

"It is certainly a way for NetServices to hope to preserve its existing customer base," suggested Paterson, who added that NetServices may have found it difficult to adapt to the changing landscape of the broadband provision market. Since NetServices went public in March of this year, it has already posted a £3m loss...

... which it has partially blamed on the explosion in "free broadband" from the likes of TalkTalk and Orange.

Now that the bulk "cease order", sent to BT Wholesale by NetServices to fully disconnect those customers who did not wish to sign up with ezeeDSL, has gone through, Biscit is contacting the disconnected customers to offer them free reconnection to Biscit/V21, said Paterson.

Paterson said he was unaware of any improper link between NetServices and ezeeDSL. He did, however, say that he hoped the regulator Ofcom would "have the power going forward to make sure that consumers are not stranded in a similar way", and tentatively voiced his support for MAC regulation.

"If a customer wants to migrate away from us to some other [provider], there is an administrative cost involved. However, if Ofcom imposes upon the whole industry that there will be no charge for MAC codes, then so be it. If they can force companies such as NetServices to release MAC codes irrespective of commercial dispute, then great," said Paterson.

NetServices replied angrily to the allegations on Monday, claiming that Paterson's comments regarding bandwidth-measuring technology were "false and misleading".

"Consistent Radius accounting data was provided throughout the length of the contract," a NetServices statement read. "NetServices throughout the first half of 2006 constantly made reference to, and in fact assisted V21 in identifying their high-usage customers. The amount of bandwidth that was being used by V21 was significantly in excess of the level to which they were paying.

"The acknowledgement of the scale of the high bandwidth usage was eventually accepted by V21 in July 2006 when NetServices reluctantly traffic shaped V21's capacity to the 100MB of bandwidth set in the contract.  The resulting impact on V21's customers and support calls received by them forced them to acknowledge their excess usage."

The statement added that Paterson "elected to buy the company after due diligence and in the full knowledge that we expected to be paid for the debt. The delays in raising the invoice include a number of issues surrounding the difficulties V21 was facing and their technical ability to interpret the data on their systems."

As well as describing "outstanding bills for tails and central pipe rentals" as amounting to "significantly more than this burst bandwidth invoice", NetServices claimed Biscit had not honoured an agreement to repay £50k per week and had been "unwilling or unable to provide any financial information to support an application for further credit".

NetServices also denied any special relationship with ezeeDSL, saying they were used "purely as a result of their previous track record in this field".