X-Stream claims its new free Internet service is doing well Monday, but experts remain sceptical.
Free ISP X-Stream introduced 24-hour, 7 day a week free Internet access Friday, warning users the service was a trial and they might not always get online. X-Stream is the second ISP to introduce such an offer in the UK. CallNet's free service has seen such demand that it is not taking any new registrations before Christmas while it deals with its customer backlog.
Adam Daum, analyst with research firm Gartner Group is not convinced the X-Stream offer will prove popular and is putting his money on CallNet. "I have more faith in CallNet to provide a reliable and profitable service. Historically whenever X-Stream has tried 0800 tests the lines have been so busy, no one could get through. It has not gained a reputation as a reliable ISP," he said.
He is also sceptical X-Stream will be able to support the offer via advertising. "Too many businesses have assumed online advertising will take them to profitability but there is not enough in the market yet," he said.
One disgruntled customer agrees. In an email to ZDNet, John Curran describes the service as "x-streamly useless", claiming he has been unable to get online using the 0800 number. "The 0800 is and has been unobtainable right from the word go," he said.
Managing director of X-Stream Paul Myers is happy with the service so far. "Nothing has gone wrong and everybody is raving about it," he said. "People appreciate our honesty about not always being able to get on and they are getting behind us, hoping it might change the rest of the industry."
Daum does not predict a stampede of ISPs offering totally free Internet time, mainly because the line between generating profit and providing a service is currently too fine. "I struggle to see it at this stage," he said. "Income from advertising and e-commerce is still embryonic and businesses still rely on the telecoms side to make money."
This source of revenue -- where "free" ISPs share the revenues from telephone calls with BT -- was threatened Friday when BT finally announced it is to offer unmetered access. Freeserve's shares fell as a result and Daum believes they will be forced to change their business model. "Freeserve will have to go for unmetered access," he said. "Heavy users are more valuable to them because they spend more and Freeserve's future depends on attracting e-commerce revenue."
Rather than a flurry of totally free Internet services Daum predicts the UK consumers will instead get a choice between unmetered and metered packages. With broadband access just around the corner -- and ADSL is expected to enter the market at £40-£50 per month -- prices for narrowband unmetered access will have to fall from the £34.99 BT is currently offering, experts agree.