AOL joins U.K. unmetered Internet war

LONDON (Reuters) -- AOL belatedly charged into Britain's unmetered Internet access war on Tuesday, saying 18 months of campaigning against call costs had finally opened the way for true U.S.-style flat-rate pricing.

AOL UK, one of the country's biggest Internet service providers (ISPs), said it would offer unlimited Net access, with free phone customer support, for 15 pounds ($21) a month.

The company has held back while others rushed in, saying it was waiting until it could offer a sustainable high-quality service -- and one which did not entail it subsidizing customers now in the hope of future profits.

AOL, which declines to say how many U.K. users it has, sees itself as a tortoise that will outpace rival hares.

AltaVista upset the Internet market in March when it announced the first major unmetered offer in Britain -- but then embarrassingly ditched the idea five months later because it would have proved too costly.

Freeserve, Britain's biggest ISP, responded to AltaVista with an unmetered package that costs users 10 pounds a month -- but Freeserve loses money on the offer.

Spokesman Matt Peacock said AOL could now join the fray with an unsubsidized service after British Telecommunications had finally yielded to pressure to open up phone lines to rivals.

The former state monopoly, which still controls the local lines into most British homes, has started offering rival telecoms companies wholesale rates for Internet access to these lines, an arrangement known as FRIACO.

"FRIACO is the revolution, the foundation for the next stage of the Internet that turns it truly into a mass-market medium," predicted Peacock.

AOL said this meant it could buy access from telcos without having to subsidies its customers.

British Web surfers, who have traditionally had to pay per minute for their phone calls, spend about eight hours a month online but Peacock said with unmetered access this should quadruple to match U.S. levels.

This should be good news for e-commerce companies and others who hope to make money via the Internet.

AOL UK, a joint venture between America Online and German media group Bertelsmann, is one of very few U.K. ISPs that still charge a subscription fee -- currently 10 pounds a month, with phone calls charged at a penny a minute all day.

The 15 pound fee will include this charge. Freeserve pioneered Internet access for only the cost of a local phone call two years ago, a system most rivals then followed. It has cornered a third of the dial-up market.

But local calls in Britain can cost up to four pence a minute, deterring people from staying logged on.

"Net usage has been severely inhibited by that ticking clock," Peacock said.

AOL said it would offer its service first to existing customers and eventually to anyone, including cable telephone customers and others who don't use BT lines.

"The pace will, as ever, be dictated by BT," Peacock said.

AOL, which led the campaign for flat-rate telephone charging in Britain, has also begun pressuring Deutsche Telekom to offer the same service in Germany.

Copyright 2000 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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AOL U.K.
AltaVista U.K.
Freeserve
British Telecommunications
FRIACO Direction & Explanatory document

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