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Gateway, Compaq ditch UK ISPs

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The number of ISPs in the UK continues to shrink following further consolidation in the Internet access sector.

Gateway.net - the ISP of US PC manufacturer Gateway – is to close its doors at the end of the month with all its users being transferred to Tiscali.

According to technical support, punters won't notice a thing – and they can even hang on to their email addresses.

However, while Gateway is happy to discuss the matter, Tiscali remains tight-lipped on the subject, although we're told to expect some sort of announcement later this week.

Gateway.net was created in February 1999 during a boom time for ISPs. Its subscription-free Net access service was pre-loaded onto Gateway PCs and ready to use for new computer owners.

Of course, it should come as little surprise that Gateway has pulled-out of its ISP business in the UK. In August last year the US PC maker said it was shutting down its UK and Irish operations with the loss of 1,200 jobs.

Gateway isn't the only PC manufacturer-turned ISP to leave the Internet business to others.

Last week it was confirmed that CompaqNET - the ISP of Compaq - had migrated 18,000 customers in the UK to BTopenworld.

CompaqNET said that the move – which happened in November but was only made public last week – reflected the company's decision to move away from being an ISP to allow it to concentrate on its core business.

In the US, Compaq announced only last week that it was hitching up with Earthlink to offer high-speed Net access to US customers who purchase a new Presario Internet PC.

IBM also announced a similar US-based agreement with Earthlink in a deal which gives new owners of IBM's Windows XP Home-based PCs free narrowband Net access for 30 days.

Back in the UK, though, and last week proved to be a difficult time. Shockwaves rippled through the sector as Cloud Nine collapsed amid a security attack that left the Hampshire-based ISP with little option but to sell its business.

Perhaps more than anything else it was the swiftness of the company's demise that stunned so many onlookers.

And Friday, Zen Internet warned that others might follow suit. However, it argued that competitive pricing for DSL – and not security attacks – would be their downfall.

On the day that Pipex announced it was subsidise the cost of DSL installation for 40,000 customers to the tune of £2 million, Zen warned that competitive pricing might be a gamble.

Zen marketing manager, Ian Buckley, told the BBC: "You could take the option of a lower price in order to gain lots of customers but I suspect you will come a cropper. A few ISPs have already gone under as a result of ADSL and we expect to see a few more go under in the next few months."

He said that ISPs charging around £30 - £35 a month for ADSL are working on extremely tight margins and may not be able to survive.

This, though, has been challenged by Sheffield-based PlusNet, which believes that "the future of Internet services in the UK [is] a bright one" and claims that current pricing is sustainable.

PlusNet's Technical Director, Alistair Wyse, said that the "very competitive" pricing levels at the moment were "the nature of Internet service provision".

The company added that it can offer its own ADSL service "on a sustainable basis" because its "cost base is kept as low as possible, through automation and customer self service".

Last week PlusNet axed around 20 jobs, which is perhaps one reason why it is able to keep its "cost base as low as possible".

Still, it's not all bad news. Today, ISP GreatXscape said it had a "seven figure sum" to invest in UK ISPs. Which is nice. ®.

Related Stories

PlusNet sheds workers
UK ISPs wanted for 'serious investment'
Pipex invests £2m to get 40,000 DSL users online
Zetnet rescues Cloud Nine
Free Web service for Gateway UK customers

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