Both Dataquest and Datamonitor are predicting that the year 2000 will bring on the era of free Internet access that many technology pundits have been predicting for years.
In Singapore, the free-internet access gauntlet was thrown by newly reformed ISP Starhub last year (5 December) when it announced free surf-only (unlimited) access to the Web to Singaporeans and immediately attracted over 100,000 subscribers. SingNet - part of the country's most powerful telecommunication infrastructure owner SingTel, soon picked up the gauntlet with its own free mysingtel surf scheme, upping the ante with free e-mail access as well, to its parent company's 1.82 million "captive" telephone subscribers.
Yesterday (17 Jan), it was announced that in collaboration with Freei.Net Asia Pacific (owned by Freei.Net, the fifth-largest ISP in the U.S.), SingNet would launch a Zapsurf Freei service to SingTel's fixed phone line subscribers. Their aim doesn't stop at a Singaporean audience: their sights are set at offering free internet access to the Asia Pacific region as a whole.
Nothing surprising, as surmised by analysts in an earlier commentary on oligopolies. Why stop at Singapore's puny 4-million population when most of the surrounding region is still untapped? Already, the free-surf phenomenon is rearing its head in the U.S. (at least 15 national services are already offering free Internet access there), Europe and other regions. More ISPs there are moving away from the subscription-based model to business based on ad revenues, commerce and financial services, analysts reveal. Some companies are even opting to create low-cost or free "stripped-down" PCs designed to offer basic Web access with a specific provider.
Said one analyst from PaineWebber in the U.S.: "In some respects, the value segment is seen as a decent business, whereas the free business is seen in some people's opinion as a loss-leader or a customer acquisition tool or a break-even business."
Still, some analysts agree that free vs. fee is not the main issue in garnering a broader subscriber base. Rather, companies will have to find new and exciting ways to educate so-called "non-wired" people to the benefits of being online in order to lure them to use their services specifically. Even Freei.Net's Rod Hamlin has said that the SingTel partnership "will accelerate the pace of Internet penetration and raise awareness of its benefits". So, for well-funded ISPs who can afford it, wide-reaching penetration (despite the high cost, loss-leader model) is the key to greater things ahead. All the more so for the Asia Pacific region, which is slated to be among the fastest-growing areas in this millennium.
One of the litmus tests for whether widespread free Internet access could work is already going on in Europe, where many ISPs are already providing free access. In cases where this is going on in Europe, e-commerce customer acquisition tends to drive merchants to offer the free access, sometimes through outsourcing partnerships with ISPs.
But in Asia, things are never as simple as the "bait your huge user base with free access, then make money off of them" axiom. Singapore's population is among the region's most IT-literate and cash rich. Easy targets, if you will, for such schemes. Can we then extrapolate this to conclude that free internet access is necessarily feasible or (desirable) in other less IT-savvy populations?
Economics teaches us that as telecommunications and Internet usage increases along with economic activity, the infrastructure needed to support it might reach a bottleneck due to the unmanageable demand. While this could be averted through the concomitant growth of the telecommunication industry in a country like Singapore (a more than welcome necessity), can we expect other ISPs in the region to be able to rise to the occasion quickly enough? If not, does this mean that only countries rich enough to set up shop in the less developed lands will get to reap profits from this trend? Is Singapore setting the region up for an untimely shakeup when some parts of region are barely out of a recession?
Another point to ponder: Will providing free Internet access compromise the quality of an ISP's service? In Singapore at least, regulatory body Infocomm Development Authority of Singapore (IDA), has made it clear that nothwithstanding SingNet's undue influence in the country's telecommunication market, the government wants a fair playing field for all ISPs in Singapore. In addition, it has set minimum standards of ISP service quality in order that the now-liberalized market would not deteriorate in customer satisfaction.
Considering that SingNet may have ready access to 1.82 million fixed-telephone line subscribers in Singapore, the other ISPs would be at a disadvantage in their marketing efforts. According to a spokesperson for IDA, there will not be information sharing between SingTel and SingNet in the provision of SingNet's free Internet access service. Said IDA's corporate communications manager, Chia Sher Ling: "IDA recognizes that there is a possibility of IASPs with telco parents leveraging on their affiliation and engaging in anti-competitive practices. This is why IDA has, in allowing SingNet's and StarHub Internet's free Internet service, required both SingTel and StarHub to work with all IASPs in a non-discriminatory and non-exclusive manner. They are required to offer non-affiliated IASPs the same arrangement as they would offer their subsidiary IASPs."
In the matter of maintaining service levels despite the intense competition, smaller-scale ISPs would incur higher costs which then have to be recouped through incredibly intense sales and marketing efforts that aren't even guaranteed to work.
While the IDA has no jurisdiction over regional telecommunication regulations or service quality, it has set something of a benchmark for its peers in other Asia Pacific markets. Some are still in the middle of economic recovery, while others are barely out of the recession. How will the regional markets react to this influx of high-tech competition without shutting the doors on them?
On deeper analysis, free i-access is looking more and more like a double-edged sword that will at once bring the Internet's benefits to more people and at the same time put additional economic pressure on the less well-to-do economies. One could argue that with the onslaught of a connected global-economy, the question is not whether free access is feasible, but how it must be made to work. So, how can this trend be made to work?
How free ISPs can prosper
Typically, we think of free ISPs using advertising, e-sponsorship and other online activities to survive.
And, if you pay attention to such things, you know there are a lot of questions about whether any pure Net ad-revenue stream is enough to keep a company going.
The Yankee Group thinks that there are other ways for free ISPs to prosper. They think the name of the free Internet game is customer acquisition and retention for e-commerce plays. With this model, big business pays ISPs not just to advertise their products, but to deliver, day in and day out, customers to their e-commerce and e-service portal doors.
Will it work? Good question. If there are long-term free Internet winners, however, they'll have to keep their costs low, and partner with content providers and big-time e-commerce companies. Another business-to-business possibility for free Net success might be to partner with companies aimed at a particular vertical industry.
How free ISPs may fail
There are all kinds of ways to go wrong with free Net service. Customers, although they love the
word free, can get sick of ads on their e-mails and sometimes-shaky connections. No matter how cheap
someone is, the old saying "you get what you pay for" may keep customers playing with free services
but going back to pay services at the first sign of trouble.
Says Bob Rankin, publisher of an Internet newsletter: "For some people, free ISPs are a good deal, especially young people who don't have much money or a credit card. The irony is that these people are not the type of customer the free ISPs want to attract, since they are less likely to respond to the advertising. People who spend more than a few hours per week online may quickly come to resent the loss of screen real estate to ad display windows."
And then some free ISPs will lose customers by not delivering on their promises. Or by making promises that some customers won't want to keep. In one case in America, to get free DSL you'll need to get the appropriate DSL router. There's only one little problem: To get a free router -- at a couple of hundred bucks, buying a DSL router isn't going to be popular -- you need to get 10 of your friends and family to sign up for its "FreeDSL" service. Can you say pyramid scheme?
Technology Profiting
So how do we win out of this? Well, if you're an ISP you can join many of your brothers and sisters
in arms by going straight to delivering business Internet services. You also can look into delivering
"wholesale" broadband, points of presence, helpdesks, and all that jazz to free Net services with
deep pockets. Indeed, anyone focusing on delivering Net infrastructure and services should do well
by the free ISP providers.
You certainly can make money from them by selling them equipment as well. After all, no matter how they make their money, they're going to need to get their switches and routers from someone, so why not from any one of us?
