With a new free ISP launching every day and clambering for the attention of UK consumers, why would anyone still choose to pay for Internet access?
Since the launch of Freeserve, subscription-based services have maintained that they provide a superior product, and remain confident that they will continue to survive in an increasingly competitive market.
While the growth of some companies, such as AOL, has been hit by the popularity of the free services (see VNUnet 25 August), some paid-for ISPs have actually benefited from the likes of Freeserve.
"Freeserve has been the best thing to happen to the UK Internet market as a whole," said Martin Higginson, director of Interactive Services at Demon's parent company, Scottish Telecom. "It has brought a lot more people onboard who wanted to try the Internet for free."
David Howard-Jones, sales and marketing director of Direct Connection, agrees, saying its customer base has actually increased since the membership boom in the free service market, including a large number of former free-service customers.
However, both Howard-Jones and Higginson believe that free services do not have the necessary resources to keep customers satisfied in the long term.
"It's not just about today, it's about the future. Demon is taking the £10 a month subscription charge and using it to invest in new features; the free services can't do that," said Higginson. "We are investing tens of millions of pounds continually upgrading Demon's services and network."
Higginson explained that having a snazzy site with lots of content is not the only aim of an ISP. "It’s not just about the front-end, it's about the back-end and the whole package. You must view this in terms of months and years down the line."
Demon therefore believes its place is to be the ISP of choice for users who become more serious about their Internet use, and will continue to grow as the market increases.
The hard sell
Direct Connection believes there are fundamental differences between the Internet service offered by free services and paid-for ISPs which people must bear in mind when choosing a provider.
"Free ISPs can be a great option for those who don't mind heavy advertising content and who don't need much help in terms of technical support," said Howard-Jones, adding that paid-for providers are better at satisfying the needs of customers who are more demanding and reject the concept of being 'sold to' while accessing the Internet.
"The focus on straightforward connection without content or advertising and unlimited technical support is more suited to people who don't have time to waste and know what they want from the Internet. They tend to provide very stable connections and a high modem-to-user ratio, meaning less overcrowding on the service. Essentially you still get what you pay for, but it depends where you place you priorities," he said.
Freeserve, however, is confident that it provides a sufficiently comprehensive service to satisfy demanding users.
"We have 1.32 million active users, a figure that isn't declining as we are growing every day. Ultimately the customer will decide: we have brought a lot of new people to the Internet and we believe that with online chat, online share dealing with real-time prices, weather and TV listings, we offer the widest breadth of services of any ISP," said a Freeserve spokeswoman.
One of Freeserve's closest rivals, Virgin Net, believe access is less important than getting people to the site and spending money online. Virgin Net went free last April in a move which the company said was easy.
"When we saw the way the market was going, we were keen to follow," said Lisa Hulme, spokeswoman for Virgin Net. "Our content was always free. We have nearly one million unique users on our online service, of which 400,000 use our access product.
"We don't care which ISP people use, we’re care more that they are coming to the site and spending money," she added.
Lineone is also blasé about how little access matters. "We have 400,000 people using our dial platform but double that amount of page impressions," said Ajay Chowdhury, managing director of Lineone, who added that a large number of visitors to its external content are Freeserve customers.
Lineone's strategy is now to attract more people to its site to generate more revenue from adverts and ecommerce deals, whereas when it charged a subscription fee, the aim was to get as many members signed up as possible. That said, it has grown from 80,000 to 400,000 members since March.
"Freeserve has changed the market and so our strategy had to change with it," said Chowdhury. "Our aim is to be the best destination portal."
A special case
All this is good news for consumers: as competition increases, providers work harder to keep subscribers. To do this, more ISPs, whether paid-for or free, must differentiate themselves, providing specialised services as the number of online consumers grow.
James Eibisch, analyst with IDC, believes that while the market is crowded, there is plenty of room for specialised ISPs.
"There can be as many ISPs as there are types of consumers. We need a broad, diverse, innovative and imaginative range of services. The ISP market is still one size fits all with relatively little specialisation; there needs to be more."
For another view of the free ISP market, see Personal Computer World May 1999
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