Update: AltaVista MD resigns amid unmetered flak

AltaVista UK managing director Andy Mitchell has announced his resignation, following the collapse of the company's pioneering unmetered Internet service package. As earlier reported by ZDNet UK News, Mitchell handed in his resignation Wednesday morning and leaves the company immediately.

Mitchell will be replaced by Stephanie Himoff as acting managing director, the company said in a statement. AltaVista will shelve its Internet access product for the time being to focus on its search engine.

AltaVista was the first name-brand ISP to announce unlimited dial-up access to the Internet for a flat rate, despite ongoing problems procuring a wholesale unmetered access package from British Telecom (quote: BT).

Mitchell has admitted the company was over-hasty in making its announcement, having misjudged the effectiveness of BT's wholesale product, Friaco. He also took the blame for miscommunication within the company, which led to AltaVista's chief executive claiming the unmetered service had users when in fact it had been delayed.

AltaVista's promises began to look shaky soon after the initial announcement when it announced the package would be more expensive than expected. It then scrapped the deal entirely, amid criticism that unmetered access was never feasible in the current UK telecoms environment. Other ISPs have also cancelled, or had major glitches with their unmetered offerings, including CallNet and LineOne.

In a statement posted on AltaVista's Web site, Mitchell admitted personal blame for the unmetered collapse, saying he should have communicated the company's problems to consumers.

"I apologise to all who feel let down by AltaVista's decision to put our unmetered Internet service on hold. I have made mistakes throughout this episode, especially in terms of my poor communication with you, and I apologise for any confusion or inconvenience."

Pierre Paperon, president of AltaVista Europe, said Mitchell's departure was "probably inevitable" because of the Internet access mistakes, but commended the former MD's "drive and enthusiasm". "Over the past seven months Andy Mitchell built our UK business almost from scratch. We are very grateful for all he has done to grow an excellent UK search service and a strong organisation," Paperon said in a statement.

Himoff, who replaces Mitchell for the time being, joined AltaVista UK six months ago as head of business development, after acting as CMP Media's director of business development for Europe, Middle-East and Asia.

Other ISPs said they were unsurprised at Mitchell's departure. "What AltaVista has done has cast a shadow over the entire [ISP] industry," said a senior AOL Europe spokesman. "AltaVista knew or should have known that what they were proposing was unviable. Enough people said so at the time, and we said so back in March. However, in their defence, their point about BT failing to deliver the true flat rate environment that ISPs need is correct."

AOL has held off from rolling out unmetered access until it is satisfied that BT's wholesale flat rate offer allows it. Currently, under Flat Rate Internet Call Origination Hybrid (Friaco Hybrid), ISPs can purchase flat-rate access between users' homes and the local call exchange, but the connection between the local exchange and the regional exchange is still metered, according to the AOL spokesman.

"The reason AltaVista blew up at the launch pad is that they realised they were facing uncapped financial risk," added the AOL spokesman. "They were saying, you pay us £5-£6 a month, and you can connect all you want. But at the back end they could have faced paying a per-minute rate of up to hundreds of pounds a month, for heavy users."

Mitchell initially laid the blame for AltaVista's unmetered cancellation firmly at the feet of BT's Friaco. "We became concerned about Friaco, on which delivery of the unmetered service depended. We couldn't risk launching a service until fully unmetered Friaco lines were widely available... I made the decision to delay the rollout and, subsequently, put on hold the service. I am remiss in not informing you [or my management] earlier about this situation."

The lack of communication even led to AltaVista's chief executive claiming the unmetered service had users, when the service hadn't even been launched. "Regrettably, during a television interview AltaVista's chief executive erroneously referred to an estimated number of users expected to have been signed up for the service based on our capacity and projection for the service rollout at that time. He, too, understood that our service was operating," Mitchell said.

In the end, despite its initial confidence, AltaVista now agrees with AOL that there is no way of going unmetered under BT's current Friaco scheme. "Like other organisations that have bailed out before us, we see no way at this time to provide a competitive product," Mitchell said. "The Friaco issue has left the marketplace in disarray, and the UK is more dependent than ever on Oftel to level the playing field."

Freeserve, the ISP that first popularised the "free" ISP model, has about 140,000 users signed up to various unmetered packages, one of which is offered through BT's SurfTime. SurfTime comes with important limitations, however, and Freeserve admits it has only been able to make a limited rollout.

"We have been careful about managing it, and not overselling it," a Freeserve spokeswoman said. "We did ramp up gradually. We took on a limited number of people, and we made it clear from the beginning we would do that."

Internet service providers such as AOL and WorldCom say they will continue to push for revisions to Friaco, despite the new Friaco Hybrid product. Oftel, the telecoms regulator, takes the position that ISPs are responsible for making clear their problems with the wholesale unmetered package.

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