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A free lunch too far

Burnt fingers for ISPs offering unmeterered access

It seems to have escaped some ISPs attention, that customers that switch telecom and guarantee a level of voice calls or pay some form of monthly fee for an ‘unlimited internet service’ expect to use it for however long they want. Shocking? You wouldn’t have thought so. And yet this dilemma is stalling the roll out of unmetered internet access.

In an embarrassing climb down LineOne abandoned its full unmetered internet access package after only three months. The company claims this was because: “Usage of this service is now much more than our original expectations - something we could not have anticipated.”

And yet according to one PC Advisor reader and ex-LineOne subscriber: “Even our five-year old neighbour’s son would have been able to predict a very high rate of uptake.”

Virgin Net has also delayed its service due to ‘technical and customer support issues,’ which came to light during its 10,000 user trial.

Breathe’s unmetered access operation, which was recently limited to a ceiling of 50,000 users in June is further reducing its users by bumping off surfers it considers to be using the service too heavily.

Sean Gardner, chief operating officer at Breathe, told PC Advisor that some users were averaging between 12 and 16 hours a day. “1 percent of users were affecting the other 99 percent and we need users to curb extreme habits so that everyone can benefit.”

He added that if any of the remaining users started similar habits then they too would be cut off.

A threat or a promise

The reason for this being a problem is that users paying a flat fee for access have a cap for their expenditure, but not their surfing time. However the cost to the ISPs is uncapped, as they still have to pay their telecom provider for every minute that is used. The ISPs also have a limited amount of capacity and bandwidth – they can only have so many people using the services at one point. To put it simply demand is outpacing supply.

Nick Gibson, analyst at investment bank, Durlacher, believed these companies aggressively hit the market in an attempt to grab market share by taking an early financial hit. The problems occurred due to the misjudging of the services’ popularity and subsequently the size of that financial hit.

He added that he was surprised that ISPs had not paid heed to warnings earlier in the year about the market’s potential. Durlacher predicted that unmetered access would mean an increase of 46 percent in users accessing the net and that the length of these sessions would increase by over 100 percent.

ISPs will increasingly be able to meet these needs as BT offers more wholesale unmetered deals to ISPs as required by Oftel. It is already offering a wholesale version of its SurfTime deal that has been adopted by some ISPs.

It removes the need for ISPs to buy time per minute and instead allows them to buy unmetered internet access from BT at a flat wholesale price – allowing the ISP to keep costs under control.

Adam Daum, analyst at the Gartner Group said: “These services were basically launched too early. They were a free lunch too far. Users expect net access to be like a utility and our research shows that they are willing to pay a monthly fee to guarantee that.”

Sunil Sood, secretary for the Campaign for Unmetered Access added: “Individual ISPs have been damaged - but not the consumer demand for unmetered services. It will mean ISPs will move to a more viable model, probably based around BT SurfTime or similar wholesale products.”

It looks likely that the business model that will develop will be ISPs reselling SurfTime, possibly at cost, and driving profit through online advertising and ecommerce. This at least will allow the ISPs to make money and offer a reliable service for consumers.

Unmetered access looks like it's here to stay – once ISPs have sorted out what they can and cannot promise.


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