Is the Free ISP Model Coming to an End? - Brief Article - Statistical Data Included

ISP Business, March, 2001

Free ISPs are facing difficult times. A variety of free ISPs have had to discontinue their services, including Freewwweb and WorldSpy. CMGI shut down its free ISP business in November. NetZero, BlueLight and Juno are the only remaining free-access pure play ISPs. NetZero, which claims over eight million registered users, introduced a pay service called NZ Platinum for $9.95 per month.

BlueLight.com, a joint venture between Kmart and Softbank Venture Capital, which claims about 6.3 million subscribers, is also changing the nature of its service and moving away from the free model. BlueLight is implementing a three-tier pricing strategy. BlueLight will charge $9.95 for 100 hours of Internet service. Nonpaying customers will be limited to 12 hours of access per month. Customers who spend more than $100 in a single order will get a free month for every $50 spent. Kmart owns 60 percent of BlueLight, and the company is now trying to convert its surfers to shoppers.

Mark Goldston, chairman and CEO of NetZero, says that BlueLight's new service is a "desperation move," and a reaction to NetZero's legal victory against Juno. The company won a temporary restraining order, enforcing the patent it owns for displaying ads on a browser.

Goldston says that other free ISPs have failed because of mismanagement and bad business models, but NetZero will survive keep the free model alive.

According to Goldston, the pay service that NetZero has added is not an admission of failure for the free model but a desire to reach the 87 percent of the market that wants to pay. But the free model will continue.