The narrowing free ISP market needs to stay -one step behind" the cutting edge of technology in order to survive, says one free ISP.

According to the marketing director of Sydney-based free ISP GlobalFreeway, Doug Garske, an ISP that runs on advertising revenues alone -will not be able to afford to be the latest technology provider".

For that reason, broadband Web access would not be a possibility for free ISPs in the near future, he said.

However, Garske said paid ISPs faced growing -churn" rates in favour of free ISPs if they did not offer a clearly superior Web connection.

He said Australia's free ISP industry had faced churn rates as high as 50 percent in its infancy. But the tables had turned recently and -the churn [was] starting to come from the paid ISPs" as customers became dissatisfied if their paid ISP connections were not clearly better than a free service.

-Churn" is the telco and ISP industry term for customer turnover.

The paid ISP industry faced mounting pressures to make broadband accessible to consumers, Garske said. Otherwise, the free ISP market appeared an attractive alternative.

Garske said the Australian free ISP market was more likely to emulate its ad-driven US counterpart than its UK counterpart, the latter involves commercial arrangements between ISPs and telcos that run on timed local calls.

The US free ISP market has consolidated and is now dominated by only -one or two big guys". Locally, -everyone's jostling to be in that position," Garske said.

The local free ISP market - made up of only a handful of major players to begin with - showed signs of catching up to the US market some weeks ago when Freeonline stopped offering free Internet access to subscribers who wanted to visit non-partnering sites.

Freeonline director Bill Lang would not comment on how many customers - from a base of supposedly 540,000 - had stayed with the ISP after the free Net tap was turned off. However, he remains confident that the now ironically titled ISP will compete aggressively in the paid ISP market.

He said Freeonline was currently investigating possibilities of broadband, and would roll out the high-speed offering -when the costs of providing that service become affordable."

GlobalFreeway claims a customer base of 180,000 Sydney and Melbourne subscribers, and fourth place in the country's ISP tree.

Copyright © 2009 CBS Interactive, a CBS Company. All Rights Reserved.
ZDNET is a registered service mark of CBS Interactive. ZDNET Logo is a service mark of CBS Interactive.