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LineOne fails, what future for unmetered?

Is BT to blame for LineOne's unmetered fiasco? Jane Wakefield investigates
Written by Jane Wakefield, Contributor

In an embarrassing U-turn, high profile ISP LineOne Monday declares itself unable "financially or commercially" to sustain its unmetered Internet service. The collapse of the ISP's ambitious plans are leading commentators to question how anyone can roll out cheap Net deals while BT maintains its stranglehold on the telephone infrastructure in the UK.

Following ntl's "Free Internet" announcement back in March, many ISPs had to decide whether to go with the untested unmetered business model or face losing thousands of customers. Many chose the latter but the majority -- including ntl -- have experienced problems either with network availability or with customer service.

LineOne's official line on why it has cancelled the service is vague. "It is commercially and financially unviable," says a spokeswoman. It is widely believed that users' abuse -- subscribers staying connected to the service 24 hours a day -- is to blame for LineOne's decision.

Director of unmetered ISP RedHotAnt Bob Garrioch last week pinpointed users' abuse as the key reason why subscribers were failing to get online to his service.

AOL -- one of the few UK ISPs not yet to offer an unmetered option -- puts the blame squarely at BT's feet. "It is extremely difficult to introduce a service without a solid unmetered product from BT," says an AOL spokesman. "The only road for the UK Internet industry is through Friaco [BT's wholesale unmetered product]. The future is now back in BT's hands."

Oftel forced BT to offer a wholesale version of SurfTime following anti-competitive complaints from rival telco WorldCom. Despite agreeing to roll out an alternative, BT has still failed to make the service available.

Consensus centres around BT's attitude on the rollout and the damaging effect it is having on other ISPs. "Potentially it should be up and running in weeks if not days," says the AOL spokesman. "Oftel gave BT a 'reasonable time frame' to roll this out and a reasonable time frame from a consumer point of view is now."

Andy Mitchell, managing director of AltaVista concurs. "Until a flat rate wholesale product from BT is available and usable, ISps will be bridging this unfortunate gap with [an] interim solution," he says.

LineOne, reticent to criticise BT, eventually admitted that the telco's tardy rollout of the wholesale product "did have a significant effect".

Looking further ahead James Eibisch, analyst with research firm IDC, argues that the failure of LineOne's service highlights the need for local loop unbundling -- due to be commercially available in July 2001.

"There are a lot of obstacles in the way of unmetered services and they are due in large part to the closed nature of the local loop," he says. "Local loop unbundling will introduce a broader range of telcos to choose access from. The more tied ISPs are to a telecom company the more likely they are to fund an unmetered service."

Gartner Group analyst Adam Daum says users can look forward to several other free unmetered ISPs to go the same way as LineOne. "There are one or two companies -- ntl is one of them -- where it is just about sustainable because they own their own infrastructure... But I doubt they [LineOne] will be the last."

Virgin confirms Monday that it is delaying the roll out of its unmetered service. "It will be delayed until September," says a spokesman. "In the light of what has happened with other companies we can't deliver at the moment. We have to refine and retune technical and customer service issues."

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