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FRIACO – Dr Jekyll and Mr Hyde

This time Dr Jekyll

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If you were undecided whether flat-rate Internet access is helping or hindering the Internet economy, worry no longer. Because today, Flat Rate Internet Access Call Origination (FRIACO) is a good thing.

In fact it is "the best interconnect model to ensure a viable business model for dial-up Internet services" and "will create the build-up of demand for broadband in Western Europe". That's according to a new report by Analysys.

FRIACO is almost uniquely a British institution, brought about by a thriving technology industry and market in the UK, a stubborn incumbent supplier (BT) and a weak-willed telecoms watchdog (Oftel).

BT has been effectively forced to cap the cost of telecoms access for ISPs. This enables the ISPs to charge consumers a flat-rate monthly fee for dial-up Internet access, instead of according to the length of time spent online (which intrinsically restricts the time that people spend on the Internet).

It's a good thing and for around £15 a month you can have "unlimited" Internet access. Other European countries have been asking for it. As the report says: "Continued lobbying by leading Internet Service Providers (ISPs) and online operators (OLOs) [that's a new one on us] has meant that FRIACO has been firmly placed on the regulators' agendas in ten other Western European countries."

This is where the argument gets murky however. The next step is broadband - fast, always-on Internet access, ADSL. All the players in the DSL market are currently blaming each other for a poor take up of the service.

It's too expensive - make BT reduce the price, the telcos and content providers say.

Circular argument

Even BT says the price is too high adding that its hands are tied by Oftel. Besides, says BT, people aren't demanding it because there's no content. We can't afford to produce content, say the content providers, because there's not enough demand because BT is holding up supply. It's getting a little tedious.

Depending on who you talk to, FRIACO is also to blame or it is the saviour. BT claims that people are so happy with FRIACO that they don't want to move to (the more expensive) broadband. Coincidentally, this is the one area in the UK telecoms market that BT is quite competitive and hence well priced. And in common with other large public telephone companies (PTTs),It also doesn't like change.

The FRIACO proponents - Analysys among them - regard flat rate charging as a vital and important step, getting people used to (and grow to love) the Internet. Once they are there, they will happily pay the extra for broadband. And then, the Internet economy will really take off and the UK will be at its forefront.

"FRIACO is not merely a stopgap between pay-as-you-go (metered Internet access) and broadband, but more an important and effective migration path to mass-market broadband. It is the only viable way for ISPs and OLOs to offer unmetered access," says the report.

"We believe that FRIACO will have a significant market for at least five years, and that it will not delay, but rather promote, the spread of broadband, by effectively building up and preparing a user base ready to take broadband services."

Active accounts

The report also throws out some figures: 64 million active Internet accounts in Western Europe by the end of this year, but 110 million by 2005. FRIACO in the UK to grow more than 100 per cent by 2003.

So who's right? Both and neither. People are currently pointing at the collapse of numerous broadband suppliers in the US as evidence that demand is not yet big to make it financially viable. But that fact can be used to support both sides as well.

One thing is for sure - nothing will happen until the industry stops blaming one another and gets on with finding some solutions. ®

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