"Over the water, in the US, they have been predicting entirely free internet access for a while," Tony Blair told a conference at 11am yesterday morning. "We have got there first."
Product endorsements do not come much bigger than this: Blair mentioned both US search engine Altavista - which on Monday announced unmetered internet access for a fixed setup and annual charge, available within three months - and US telco NTL, which raised the stakes yesterday (Tuesday) by offering free internet access from 17 April. "I'm sure that others, including BT, are now ready to break new ground themselves," he added.
It took less than 24 hours, as New Labour pulled off its favourite trick of getting companies to do its bidding without owning them - saving on the cost of renationalisation. This morning [Wednesday], BT announced that from 1 June, it will offer unmetered internet access on peak-time calls.
However, the monthly cost will be just below £30 - much higher than the £10 to £20 annual charge proposed by Altavista, or the £10 of calls a month non-NTL cable customers will have to make to qualify for unmetered access. Analysts dismissed BT's move as half-hearted.
Internet service provider Freeserve, whose existence stems from the UK's lack of free local calls, is expected to reply soon. It will have to - its shares fell by almost 23 per cent in the first two days of this week, as have other competitors. Internet access is moving rapidly towards the US model, where the access price is fixed, and usage unmetered.
What effect will this have? Venture capitalist Durlacher issued a report earlier this year, predicting time spent on the web would triple if per-minute charges were abolished. The bank's director of research, Andy Bottomley, today told vnunet.com that he thinks the moves of the last few days have stemmed from this report being picked up by government ministers, including chancellor Gordon Brown and the prime minister, whose speech yesterday included a pledge to get every Briton online by 2005.
Alexander Rainer, senior analyst at research house Datamonitor, said unmetered offers are likely to tempt those with PCs online, if they are not already. "But for those without, the main barrier to entry is the £500 to £1,000 cost of a PC," he said.
However, cheaper options are on the way. Consumer electronics firm Alba said on Monday it will introduce a £199 television that can surf the web through a phone line, along with set-top boxes for £99, by June.
Watch out, unmetered access about!
The biggest impact of unmetered access will be on those already online, according to Rainer. "Usage will increase dramatically. We see a huge limiting factor, with people getting charged by the minute," he said. "People will look around, click on banner ads, do price comparisons and check information services - they won't be looking at their watches."
Neil McEvoy, director of ecommerce advisers Consult Hyperion, agreed ecommerce sales will benefit, but said the companies offering the services may not. "You are not locked-in to buying through NTL," he said, referring to the plans of service providers to take commissions from sales made through their home pages. "I'm sure some will buy through home page portals, but most will get savvy and buy from wherever is best for them."
House and garden
Hyperion's McEvoy added that web vendors should see deals with home pages as 'transient', and concentrate on deals regarding mobile phones and increasingly, interactive television. The latter is due to interactive TV taking a 'walled garden' approach to the internet, of limiting access to the sites that pay for their place.
"The walled-garden approach stacks up," said McEvoy. "Once someone has bought a Sky Digital box, they will be locked in, and the numbers of people there will be substantial."
Unmetered services in the US have led to many buying second lines and leaving their connection to the internet open constantly. "I imagine there will be bottleneck problems, although I don't think these will be major," said senior analyst Philip Lakelin at telecoms specialist Analysys. "Longer term, BT will probably have to think about siphoning off IP [Internet Protocol] traffic before it hits its voice switches."
NTL can to some extent use its own local lines, rather than BT's, as it is buying the consumer interests of UK telco Cable & Wireless Communications, which includes cables into some homes.
Lakelin said BT stands to benefit as a wholesaler of internet calls: it has deals with Tesco and Sega Dreamcast, for example, even if its own home internet service is threatened.
Brand and deliver
Firms seem determined to throw money at giving customers access, even if it costs them money, so maybe BT is better off in wholesaling. "These companies are trying to do a land-grab," said Analysys' Lakelin.
One could see both offers so far as attempts to build brand. NTL has spent heavily on adverts starring the friendly voice of John Peel, just to let people know it exists. How many people in the UK had heard of Altavista before this week?
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