The Anglo File: Subscription ISPs Struggle to Survive in a Free Society

Subscription ISPs must offer a superior service if they are to survive in the U.K.
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LONDON -- At first glance, a recent survey of Internet service providers, or ISPs, in the U.K. would appear to support the idea that subscription ISPs -- those that charge users -- offer better service than free ISPs.

Inverse Network Technology

, a U.S. Web monitoring firm, released its March 1999 survey of the performance of 19 British ISPs and found that, of the four free ISPs included in the poll, only

British Telecom's

(BTY)

ClickFree

service was anywhere near up to scratch.

And much-touted

Freeserve

, the Internet subsidiary of

Dixons Group

and the U.K.'s largest ISP, made little impact in the ratings.

While those results might suggest paying for your Internet service is the way to go, it's also fair to say the performance of the subscription ISPs was underwhelming. And because local calls in Britain are metered -- a situation that discourages the surfing so popular in the U.S. -- the free ISPs have had room to muscle in.

Dixons, whose primary business is running retail electronics shops, began offering free access to the Internet last November, relying on a slice of phone charges, advertising and e-commerce for revenue.

This strategy proved so popular that, in only 12 weeks, Freeserve -- which Dixons is considering

spinning off -- overtook

AOL U.K

, a unit of

America Online

(AOL)

, as the largest ISP in the country. It now has around 1.1 million active members, compared with AOL U.K.'s 600,000 members. Needless to say, other ISPs quickly followed suit and free ISPs are now a dime a dozen.

Suffering in a Free Society

Some subscription ISPs remain resolute, arguing that you get what you pay for and that there is demand for both types of service. Following the results of the survey, AOL put out a press release hailing its position as one of the best-performing ISPs for downloading Web pages in the U.K. It wouldn't, however, return phone calls from

TSC

.

A high rating in the test measuring download time implies that an ISP is spending money on technology such as compression and caching software, says Nainish Bapna, technology analyst at

Nomura International

. Yet he also pointed out that this was the only category in the survey where the subscription ISPs notably outshone their free brethren.

Don't Leave Your Home Page Without It

Is a few seconds difference in downloading a Web page enough to prevent the subscription ISPs from facing the same fate of the dinosaurs they increasingly resemble? Probably not, and AOL's actions suggest it doesn't think so either.

AOL has shown no signs of a plan to offer a free service, but it is apparently looking to introduce a tiered payment structure in the form of platinum, gold and silver services, similar to credit cards.

"Maintaining a simple-tier structure is a good approach," says Noah Yasskin, analyst of European Internet strategies at

Jupiter Communications

. He emphasizes that the structure must be simple because the reaction of consumers to 10 different price schemes is to go elsewhere.

British Telecom takes a different approach and has two completely separate ISPs -- the

ClickFree

service for the price-sensitive user and

BT Connect

, which is a pay service that caters exclusively to businesses.

The free ISPs also haven't totally abandoned the idea of subscriptions.

Virgin Net

offers basic free Internet service, but its members can choose from two payment options for customer support: either unlimited support at local call rates for a fixed monthly subscription or a per-minute support charge on a premium rate phone line.

Finally, Yasskin says the subscription ISPs need to clearly communicate to customers the advantages of paying for Internet access, such as content, better customer support and newer technology.

While some of these schemes may yet rescue the subscription ISPs from oblivion, before they embark upon fancy premium service plans and the like, they need to actually offer a decent service and make the concept of "you get what you pay for" at all meaningful.