BT delay saves Freeserve big money

BT footdragging over unbundling the local loop is saving Freeserve around £300,000 a month. That's how much extra subsidy the ISP would have to shell out, if it were able to satisfy customer demand for unmetered access.

Currently, Freeserve has 250,000 customers signed up - at £10 each per month. And it's losing a couple of pounds on each account. But CEO John Plutheroe says the company would have had 400,000 on its books if BT had got its act together.

BT inertia means that sign-ups are limited to only 2000 a day, he told the Daily Mail.

So why the hurry, if it means losing so much money? Well, Freeserve reckons the unmetered access business will move into profit as soon as Christmas. That is, however dependent on the introduction of FRIACO (Flat
Rate Internet Access Call Origination), a more favourable wholesale Net tariff structure, by BT. FRIACO was originally slated for a June/July launch.

More importantly, the free-access-but-pay-as-you-go ISP model pioneered so successfully by Freeserve is - except for very low-usage customers - effectively dead in the water. Flat fee access delivers what Intel's Andy Grove would describe as a strategic inflection point - in other words, a fresh opportunity for competitors to attack the soft underbelly of Freeserve's 2.1 million customer base. It is crucial for Freeserve that it does not falter during this time. ®

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