BT pressured over flat-rate Net access - Company Business and Marketing

CommunicationsWeek International, March 20, 2000 by Ian Scales

Competitive carriers in the United Kingdom are close to hammering out a deal with BT that would enable them to interconnect with the U.K. incumbent's unmetered Internet access offering, Surftime, due to be launched in June.

As a result, users of services from Internet service providers not affiliated to BT but to other licensed operators will be offered the Surftime option without their ISP being forced into separate wholesale arrangements with BT, say sources.

"[BT] pre-launched Surftime to the press without opening and agreeing interconnect arrangements first," said Jo Upward, head of regulatory affairs at London-based Energis plc, one of the operators negotiating with BT. "As we see it, with the current negotiations we're now getting the balance right-we'd rather not have BT driving the agenda on Surftime."

Upward said the interim arrangement would not involve any revenue exchange between the parties. However, it would provide breathing space for BT's competitors while further negotiations could be conducted over terms for wholesale services with BT. These arrangements would enable competitive carriers and their ISP affiliates to engineer their own flat-rate offerings to compete with BT.

"BT recognize that they have to make concessions to get the [Surf-time] offer out there," she said.

The latest moves come after a series of major announcements on free or flat-rate Internet access in the United Kingdom, led by ISP and portal operator AltaVista, which announced a free access offering. The market is now trying to assess the implications of what appears to be a new phase in dial access, with some observers heralding the developments as the end of the United Kingdom's flirtation with subscription-free metered access to the Internet.

In fact, all the signs point to a period of market confusion as players attempt to build new business models to take account of the changes that competition around free and flat-rate dial access will generate.

"There is definitely a potential shift in the market," said Graham Rowan, divisional manager at Equador Consulting in London. "And it will give a new stimulus to Oftel to regulate properly for the Internet.

Once wholesale terms are hammered out with BT, competitive operators such as Energis can be expected to come to market with their own unmetered or hybrid unmetered/metered offerings.

For example, Freeserve, access for which is provided by Planet Online, the ISP subsidiary of Energis, would be able to offer its subscribers Surftime contracts, offering unlimited unmetered online time for a retail flat rate of [epsilon]29.25 ($47.50) a month.

"I think we may see Internet access get even more like the U.K. mobile telephony market," said Energis's Upward.

The U.K. mobile market has already thrown up a plethora of charging options, in part stimulated by retail chain involvement. With the big U.K. high-street multiples, most notably Dixons Group plc with Freeserve, already offering both subscription-free metered Internet access services and mobile phone services, the scene seems set for their acting as a channel to offer bundled flat-rate Net access with both fixed and mobile telephony.

"This is a fight for customer ownership," said Equador's Rowan. "That's what matters at the end."

In fact, the current turmoil really kicked off when U.K. competitive operators and many ISPs were concerned that BT was attempting to bounce the U.K. regulator, Oftel, and U.K. dial-up ISPs, with its Surftime option announced in December last year (CWI, 13 December 1999, p.1).

That offered dial users unmetered Internet call access for a flat payment, but would have required ISPs to make use of BT's carrier wholesale services to enable their users to take advantage of the product. Because of political and public pressure for the development of unmetered access, critics suggested that BT thought it would be hard for Oftel to be seen to stand in the way of the new tariffs even though no concomitant wholesale offerings had been agreed with other carriers.

"BT was attempting to disintermediate the market and by-pass the competitive carriers," said Equador's Rowan. "BT is doing its usual thing of pushing things as far as they can go."

Rowan said local infrastructure looked set to play a key role now, and that alliances between access operators and ISPs will most likely be the way ahead, he claimed. But now the negotiations are under way, they are also expected to produce longer-term agreements on the way wholesale elements in the new network architecture that BT is deploying--to support the unmetered access--will be priced and presented to carriers and ISPs.

"We're pushing for a generic service offering, so that we can help ISPs develop their unmetered packages, using the same building blocks which [BT] use to engineer Surftime," said Energis's Upward.

Those building blocks involve BT's deployment of modems in its local exchange and its national IP network, which together enable it to forward decoded data, rather than switched calls, direct to ISPs or even direct to the Internet itself.