FRIACO offers ISPs a safety net - Company Business and Marketing

Telecommunications, March, 2001 by Sanjima DeZoysa

LONDON -- The introduction of FRIACO (flat rate Internet access call origination) in the UK last month should help to prop up ISP business models based on fixed monthly subscription charges only.

In the US, unmetered access is the norm and a handful of ISPs, including Freeserve and AltaVista, tried to replicate this model in the UK. However, although subscribers enjoyed the benefits of the fixed-cost internet access subscription package, ISPs were still required to pay BT on a per-minute basis for the time that their subscribers spent online. "A risky business model producing huge bills for ISPs, with many withdrawing services," claims Mike Valiant, market development manager, CommWorks, which helps BT and other operators meet the SLAs set with ISPs, and also helps ISPs meet consumer expectations.

FRIACO, created by economists commissioned by AOL and enforced by Oftel, requires BT to offer internet telephone access on an unmetered basis to other operators, such as Colt, Energis and MCI Worldcom, who are then able to resell this capacity to ISPs on similar terms.

'The winners will be those ISPs that gain the greatest customer base and are successful in encouraging their customers to spend most time online,' claims a paper by CommWorks, based on a roundtable industry debate on flat rate internet access in December last year. 'These ISPs will have the regular income from subscriptions, but will also attract the greatest advertising revenues to their sites and earn most transaction fees from online shopping.'

However, to gain profit from these new revenue streams, ISPs will have to focus more closely on their quality of service (QoS) -- which will be the key differentiator enabling ISPs to remain competitive and profitable. "If ISPs offer a FRIACO-based service it will mean greater investment in network infrastructure," continues Valiant.

But, FRIACO does not bring benefits to the consumer market alone. According to Valiant, "Those ISPs that focus on providing internet access alone will also be able to benefit from FRIACO by focusing on the business user who needs fast, reliable connection

The introduction of FRIACO is unlikely to replace the free subscription model for Internet access completely.

Both models will be able to co-exist focusing on different market sectors.