Not dead yet
The free ISP business isn't dead yet, even if many of its most visible proponents are gone and the stocks of those remaining have plummeted.
What has happened is consolidation around three main companies and their decision to concentrate on finding revenue. NetZero, Juno and BlueLight have cut back on their focus to offer free service, and in most cases the companies are trying to discourage extensive use of those connections. But they are still available.
NetZero, the first and largest of the free providers, has intensified its longtime concentration on marketing. It continues to find new ways to slice, dice and deliver its subscribers to advertisers, and analysts say it has done so fairly effectively.
Juno is heading down the path of high-speed, or broadband, connections. Once its subscribers get a small taste of the Web, Juno hopes they'll want larger, faster doses and will be willing to pay for them.
BlueLight, which last week announced its CEO was leaving and it would transfer much of its operations to corporate parent Kmart, has targeted Kmart shoppers in an effort to keep its subscribers close to home.
In common, the companies have acted to minimize their biggest threat: the subscribers who use their services for many hours a month, consuming expensive bandwidth.
"We took a close look at how people were using (the service) and found that the top sites were porn, Napster and games," BlueLight spokesman Dave Karraker said. "So what we did was say, 'If you're not using the ISP to shop, you can find another free ISP.'"
BlueLight limited use of its free service to 12 hours unless subscribers started shopping at its e-commerce site. Juno imposed more ads on its subscribers who weren't paying and kicked them offline more often. NetZero limited its free subscribers to 40 hours of surfing per month, stopping a little short of the others.
Each has also instituted a pay plan, charging between $9.95 and $14.95 for unlimited use. Analysts say this will quickly become the largest component of revenue, as it already has for Juno.
Whether that will be enough to help the companies succeed is still open to question. Aside from AOL, none of the large ISPs turns an unambiguous profit even though each charges nearly $20 a month. Analysts say the free or discounted ISPs may have more financial thinking to do.
"Looking at $9.95 a month, I think we're still within our rights to ask whether they can make a profit at that level," Brooks said.
Nevertheless, most analysts believe free access will survive if it is slimmed, limited in time, and used almost solely as a marketing tool. Access to the millions of free ISP customers remains valuable for those who can use it correctly, they say.
The companies "aren't yet out of danger," said Rob Lancaster, a Yankee Group analyst. "But they won't get rid of the free services. It's been the heart and soul of their operations".
