Free Internet Service Providers
1) Free ISPs Consolidate in Europe
What exactly is a free Internet Service Provider (ISP), how they work, and where you can get one. If you were asking this question in the spring of 1999, you would literally have been witness to an explosion of offerings.
The concept of free ISPs is a pretty big deal, for example, in the United Kingdom. During the first part of 1999, there were an estimated 5 million plus Internet users. The largest free ISP in the UK, Dixon's Freeserve had a base of 1.3 million users, or roughly 1 in 5 of all UK Internet users. But if the service were free, how would they have been able to generate revenue? Well, Dixons is the UK's largest computer retailer, so it can distribute the necessary Internet software on it's own PCs. Also, Dixon had the advantage of being the first service of its kind, not unlike NetZero in the U.S.
Freeserve also developed itself as a portal early on. Remember, the goal of the portal sites is to utilize every trick in the book to (a) attract enough visitors who are interested enough to make repeat visits to that site, and (b) keep those visitors on a particular site long enough to expose them to as much advertising possible. Freeserve was no exception: it's main source of revenue being the fee it charged advertisers based upon the number of users who view a particular ad and how long those users view an ad. So the more free a service becomes, the higher the ad rates, and the more features a site might add. The other source of revenue was the fee charged for telephone customer support. It turns out that in Britain, the ISPs receive a share of the revenues from the phone companies. Oh yeah, and let's not forget in order to get the service, people are encouraged to buy Dixon's hardware. See, it's not necessarily free!
Some analysts in 1999 were very skeptical about the viability of free ISPs, especially in the US, because:
In the US, users have flat-rate local dialing access, and in Britain, you pay for every minute you are on the phone, for each phone call.
The telephone companies are able to attract users with other incentives that make Internet access fees tolerable, at least up to a point. Given the reach and infrastructure of US phone companies, there is also some level of brand loyalty or quality assurance that free services might have a hard time developing and maintaining.
Some users may bypass the free ISP's portal in favor of another online portal site or for-fee comprehensive access service that better suits their interests.
There was a sense that more low-income users would sign up, rather than key consumer demographic groups desired by the advertisers supporting free ISPs.
In the year 2000, however, its a different picture in Europe. At 2 million subscribers, Freeserve, is still the largest ISP in the United Kingdom. It was recently announced, however, that Wanadoo, the largest ISP in France (owned by France Telecom) made an offer to purchase Freeserve from Dixons.
Approval is expected on this bid, which follows an earlier unsuccessful (and higher) bid by German ISP T-Online (owned by Deutsche Telekom). If it goes through, the free ISP offerings will most likely diminish as the consolidation trend of Internet access providers on the continent will continue. Italian ISP Tiscali, for example, bought the Dutch ISP World Online in September. Wanadoo, additionally, has been going on a portal buying spree in Belgium, Denmark, France, and Spain.
The consolidation push also reflects the low market value of ISPs and portals in Europe, particularly free ones. What these services do offer, however, is a means for telecommunications entities wanting to move into previously closed markets a means to gain a foothold to a built-in audience for products like wireless service and high-speed Internet access. Usually these services are introduced at a low introductory rate, but without comparable competition from other entities with the same degree of telecommunications infrastructure or capital, there's no guarantee that those services stay low (and affordable) over the long haul.
2) Free ISPs Fail in the US
There has been a similar fire sale of free ISPs in the U.S. as well. Early this year, Juno Online Services acquired a chunk of free ISPs Freewwweb and WorldSpy, and then turned around to arrange a co-branding agreement with Time Warner. There have, however, been a series of even more substantive (and highly publicized) free ISP failures.
Of course, this is not good news to those who have benefited from both free Internet access and the built-in advertising base it was to attract, especially in the U.S. You might remember a separate NPTalk discussion, also from last year, where we highlighted a number of free Internet access co-branded partnerships involving ISPs and commercial retailers. The idea was that the retailers would market free Internet service in order to attract more potential online consumers, exposing them to banner advertising and collecting key commercial and marketing data in exchange for free browser and e-mail tools.
Now, to be fair, there were complaints about the quality of the connections, the innumerable amount of ads, the limited number of local access numbers available in some parts of the country, among other things. But these services also represented a means through which larger numbers of people could get their first taste of Internet access.
The hardest hit were those who used the service sponsored by Internet portal AltaVista and ISP 1stUp, which also provided services to Lycos and Excite@Home portals. There were also folks who lost out due to the failure of a service called Spinway, which was co-branded through partnerships to entities like Kmart. Why did these efforts flounder?
Well, their business model was predicated on advertising and lots of it. The idea was that by providing free proprietary services through a brand name people trusted, their entire orientation online would be shaped through that brand name and related services. But, when retailers turned skittish earlier this year about putting more money in online marketing with no guarantee of solid returns, they simply stopped supporting such services.
The one million subscribers who were still using the Altavista service will get three free months on the Microsoft MSN service (and will then have to pay US$21.95 per month). The slightly more than 5.2 million subscribers to Kmart's Bluelight service through Spinway will still be supported for a little while, at least through Christmas. The problem, in Kmart's case, however, is that by supporting the ISP service, they also must now provide operational support to other retailers who bought into the service as well-in essence it must provide ISP service to some of its online competitors.
3) Independent ISPs Revolt Against Portals
There is, however, another piece to this puzzle. As they attempt to maintain a sustainable level of technological growth to stay competitive and keep their existing customer base, smaller ISPs are facing some difficulties.
According to Jim Wagner's 11/30/00 Internet News item, a number of "independent" ISPs are moving away from partnerships with online portals through which they provide free Internet access. From the ISPs perspective, none of the service costs are borne by the portals, so it raises the question of why such services should continue to be provided in the first place. An additional complaint is that though the ISPs generate traffic to specific co-branded portals and online retailers, there seems to be no reciprocal traffic generated by the portals to the ISPs providing the service. This means that higher end services cannot effectively be marketed to the traffic generated by the ISP in the first place. What's an ISP to do?
What they have started to do, according to Wagner, is simply provide a higher degree of customer service and technical assistance, in some instances engaging their subscriber base to find out what comparable services they can offer within the financial means of the ISP. There are some portal and online directory portal partners that are singled out as being "good" in terms of reciprocal traffic with independent ISPs (oh, alright, since you twisted our arm, they include Go.com, Google, LookSmart, and Switchboard).
All this said, the threat (or promise) of free Internet access has forced ISPs to think about providing subsidized services to attract a larger customer base.
We would be remiss if we did not note that some community networks and "freenets" in the United States and other countries offer free dial-up access, in some instances since the late 1980s. While the number of dial-in lines is limited, and a good number of their subscribers have migrated to paid dialup and high-speed Internet access services, these resources have provided Internet access to underserved areas, and have helped to develop, promote, and engage communities and their resources online. In a number of instances, the online community directories provided under these entities were the precursors to the ubiquitous online portal. Where their presence is strong, they have also helped to keep prices from competing commercial ISPs low.
Offering some form of subsidized service has helped keep some independent ISPs in business. But subsidized services cost, in terms of money and other resources both of which many ISPs are finding they do not have at their disposal.
4) Free DSL: Desired, Sadly Lacking
You might now ask, "But what about those free high-speed DSL broadband ISPs, I have heard about? They must be surviving, no?" Well...
There is an already high (and growing) level of interest from consumers and business who want high-speed broadband Internet access-and actually do want to pay for it. The costs of entry into the DSL field in general, moreover, were significantly lowered in November 1999, when the Federal Communication Commission told local phone companies that they needed to share their telephone lines with high-speed DSL providers. Right now, at best there are slightly more than 1 million DSL connections used in the US. But by 2005, some estimates claim that nearly 12 million people will access the Internet via DSL connections.
But if you think the market has simply sucked for free ISP service in general, it has been just as bad for free high-speed digital subscriber line (DSL) services as well, according to Corey Grice's 12/5/00 CNET News.com piece. And don't ask about the few free DSL services. What's going on?
Remember the local phone companies (like SBC Communications, BellSouth, and Southwest Bell) we've mentioned previously in regards to reciprocal compensation agreements? Well, it turns out, according to Grice, that those same companies actually control most of the existing DSL market. It makes sense, because they own the phone lines in the first place.
This has had a ripple effect on other companies which, in order to compete, have had to spend significant sums of money (especially advertising dollars). The ironic twist to this is that the DSL market was one the local companies were perfectly content to ignore (in favor of older high-speed technologies like ISDN and T-1 connections)-- until the entrance of DSL firms awakened their interests.
The sheer number of firms that sprung up to offer their services led to a situation where a lot of small entities were competing against one another much earlier than anyone expected. This had the effect of depressing the prices a company could reasonably charge if they expected attract customers in the first place. Big name providers have suffered, including Flashcom, New Edge Networks, NorthPoint Communications, and even PSINet. This has had another major effect because in some instances, these companies are not only ISPs unto themselves, but in many cases are the sole provider of high-speed access to other ISPs as well.
So if you think US$40-50 per month for high-speed DSL broadband Internet access is too much, keep this in mind: the fees charged to DSL subscribers does not, in many cases, compare to the money DSL service themselves are spending a to stay afloat. It turns out that a number of firms are even seeing a smaller net return than regular dial-up ISPs. This is difficult because investors are not as willing to let their money burn so quickly as they were before technology companies started falling out of favor in general, so there is more pressure for firms to show profits in a much shorter time window. Add to the mix the fact that it costs DSL providers anywhere from US$100-200 to deliver service per subscriber. The technical infrastructure is being built to lessen the costs, but it will still take time to build.
Guess what this means if you are really, truly, honestly expecting *free* DSL? Rather than spoil the surprise, we'll simply point you to the free summary of a US$995 report which came out earlier this year from high-tech market research firm Cahners In-Stat Group. It notes that free DSL is:
indeed available, but not in every potential market;
free as far as the service goes, but you do still have to buy the DSL *modems*;
heavily supported by all manner of banner ads and/or advertiser oriented streaming content, which can (and does) slow down the DSL network;
generally provided in a slower version known as ADSL, so that the service can convince you to upgrade to faster DSL-- for a price;
If you want to learn more about DSL, one of the best, honest, easy-to-understand nonprofit resources can be found via Marnie Webb's excellent TechSoup article on the subject, with helpful key links.
What's really at stake with this high-speed pipeline for nonprofits? Ironically, it is not simply the speed, as Jemal Le Blanc points out in a great essay courtesy of the Benton Foundation. It is the ability to take advantage of new information types and formats that expand the range of collaboration across organizations, and the means through which the utility of text, sound, video, can be utilized and distributed in a variety of ways. To paraphrase, it is not the speed, but the amount of data that can be accessed and distributed that will make high-speed Internet important for nonprofits.
5) So Where Can I Find a Free ISP?
Being the intrepid NPTalkers that you are, you're still probably asking, "well, gee whiz! There must certainly still be free ISPs, or some way to get free Internet access, right?" Well, yes, but it will take a little bit of research to see if the service is right for you. Fortunately, if you are willing to let your experience and common sense guide you, we located some resources [within the sidebar] for information, discussions, and ratings on available free ISPs that might assist you.
11/30/00 Internet News
November 1999 decision on DSL over phone lines
Federal Communication Commission
12/5/00 CNET News.com
Cahners In-Stat Group
TechSoup article on DSL
Organization For Community Networks