ntlworld - industry gasps at truly free model

Expect more free offers and watch the major players rush to defend core businesses with similar deals. Justin Pearse reports
Written by Justin Pearse, Contributor

The arrival of completely free Internet access from cable firm ntl, will force ISPs like Freeserve to introduce unmetered tariffs and will offer a far greater challenge to existing players than AltaVista's plans, say analysts.

ntl on Tuesday announced that it would beat AltaVista's seemingly revolutionary offer, hands down. The cable company, which sponsors Celtic Football Club, will do it for free -- AltaVista will probably charge a one-off £30 fee and an annual payment of £10 -- and will do it first. ntl will launch ntlworld on 17 April, with an Internet-through-TV service due shortly after. AltaVista will launch its offering in three months.

There are, however, two catches with ntlworld:

  • Customers have to switch to ntl as their telecoms provider, which is similar to Screaming.net's deal with Localtel, but on a bigger scale.
  • Only BT customers can switch to ntl and they have to spend at least £10 per month on voice calls to qualify. Cable and Wireless or others will not be eligible. ntl is currently in negotiations to buy Cable and Wireless' residential business.
  • Fresh from hailing AltaVista as the God of all things unmetered, analysts were quick to suggest the search giant now has feet of clay and predict grand things ahead for ntl. "Freeserve will be forced to follow ntl's suit," said Adam Daum, senior analyst at Gartner Group. "Otherwise ntl will do to Freeserve what Freeserve did to AOL, and their growth will grind to a halt." (Note: ZDNet will bring you an exclusive Eye2Eye interview with Freeserve chief, John Pluthero, starting on Wednesday).

    More importantly, Daum, who has been a fierce critic of British Telecom's (quote: BT) failure to bring down the cost of Net access, believes the arrival of truly free services will hasten the adoption of unmetered tariffs. He also asserts ntl's fibre optic network, which covers 5.6 million UK homes, will give it a significant advantage over AltaVista. ntl is already marketing its phone and television services to customers and can simply add the new service to its marketing strategy, converting existing customers to Internet subscribers. "AltaVista has none of these synergies," said Daum.

    Durlacher analyst Nick Gibson agrees ntl's move will force the hand of other leading players. But, argues Gibson, cable operators still have to persuade consumers to switch their phone service. "This limits the market for ntl. BT is still in the best position to offer unmetered access with 80 percent of the country on a BT line," he said.

    Although ntl is expecting a huge surge in its subscriber base as a result of the new service, it is confident it will avoid the subscription problems experienced by other free services, such as CallNet. Jerry Roest, ntl Internet group managing director, argues that although "it is possible demand will outstrip capacity", the company has a "strategy in place" to ensure it will be able to meet demand.

    "By April 17, we estimate a registration list of many hundreds of thousands," he says. "But if this is pessimistic, then we will queue registrations on an evergreen waiting list, which may lead to a wait of perhaps many weeks until early summer."

    In a further effort to prevent network congestion, ntl will be introducing a 10-minute timeout period. It will also discourage corporate use of the service by forcing users to reconnect every two hours.

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