Tesco abolishes Net charges

The UK's no. 1 supermarket Tesco ditched its monthly Net access charge in a bid to wire millions rather than thousands of customers.

The supermarket chain launched TescoNet last year with an £8.99 monthly charge. But with the growing trend towards free Web access, Tesco hopes to boost its 17,000 subscriber base by offering free connections to its 10 million Clubcard holders -- a move that could make it one of the biggest ISPs in the UK. It will also help the store get a firm foothold in the rapidly-growing e-commerce market place.

When high-street retail group Dixons launched its no-fee Net package FreeServe last year, more than 8,000 people signed up each day. IDC analyst James Eibisch predicts more service companies will offer free Internet connection, reaping the rewards of an Net interface to their services and the potential for tracking customers' buying habits. The target marketing potential of the service was highlighted by Tesco managing director Tim Mason. "When we launched Clubcard it enabled us to tailor our business to the individual needs of our customers. The Net enables us to take this much further," he said.

TescoNet users will now be charged 50-pence a minute for the helpline, telephone support was free as part of the £8.99 per month deal. Dixons, which charged £1 per minute for its helpline, today halved its telephone support charges.

The supermarket giant also plans to expand its e-commerce business with the introduction of online banking and, in a joint venture with catalogue company Grattans, a selection of `lifestyle ranges', beginning with a Baby & Toddler collection. Tesco's Web site currently attracts 5 million visits per month.

Separately, internet access is currently under review by the telecoms watchdog. A new Oftel report, due out this month, may recommend changing the way revenues are shared between ISPs and telcos, according to Eibisch. "In the case of Freeserve, BT transfers the call to Energis. BT gets 30 percent, Energis gets 70 percent of which a proportion goes to Freeserve. If BT were to get a larger share, it would lower the revenue to ISPs. This may force ISPs like Freeserve to change its business model and introduce advertising, Eibisch said. However, he doubted it would have a long term effect on the trend towards free Internet access. Currently 25 to 30 percent of home accounts are with free ISPs and Eibisch predicts this will rise to 90 percent by 2002. According to Eibisch, Barclays is due to announce a free Internet service "imminently".