Interesting article comparing European ISP costs to U.S. - paying by the minute? Ludicrous!!
Sunday April 4 1:36 AM ET
Net International: Telekom-AOL Online Clash Flares
By Neal Boudette, European Telecommunications Correspondent
FRANKFURT (Reuters) - An increasingly heated battle among European Internet access providers flared in Germany
Thursday as Deutsche Telekom AG (NYSE:DT - news) and America Online Inc (NYSE:AOL - news) renewed their clash
over prices.
Germany's former monopoly, Telekom, went ahead with a rate plan previously blocked by a court, and AOL said it was
looking at legal options to stop what it believes are predatory prices.
The dispute comes as pressure builds to lower access costs and encourage Europeans to get online, analysts said.
''In some ways Europe is in danger of stalling or crushing its consumer Internet,'' said Noah Yaskin at online researcher Jupiter
Communications Inc. ''The way costs are structured now really hurts Internet use.''
Thursday, Telekom, which has a monopoly in local phone services in Germany and dominates the nation's online sector, said
users of its T-Online service would now pay a total of six pfennigs ($0.331) a minute for the service.
That includes three pfennigs a minute for accessing the service and three for the local phone call to reach T-Online. A Hamburg
court had blocked the plan until Telekom provided the breakdown.
AOL, which has complained about Telekom to the European Union, maintains the breakdown shows Telekom is using
discriminatory prices, spokesman Frank Sarfeld told Reuters.
T-Online used to charge five pfennigs a minute for access alone. ''We believe they were losing money at (five pfennigs) and that
means three pfennigs per minute is below their costs,'' Sarfeld said.
The local call charge of three pfennigs a minute also amounts to price dumping since Telekom charges eight pfennigs per minute
for other daytime local calls, he said.
Germany represents a key European market for AOL. It is one of the largest outside the United States, but the world's largest
online service provider only has 850,000 users there, versus about three million for T-Online, Europe's largest ISP.
Part of the problem in Europe for AOL and other ISPs is that the former monopoly phone companies like Telekom do not
allow unlimited local calls for a flat monthly rate.
In the U.S., where flat rates are common, users average about 30 hours a month online. AOL's German users average about
seven hours a month, and T-Online users even less.
''Paying for every minute stifles Internet use,'' Yaskin said. ''Imagine going to a movie and having to pay every minute you're in
the theater. The metering is what hurts.''
Some European ISPs are beginning to find ways around the relatively high rates of carriers like Deutsche Telekom, France
Telecom (NYSE:FTE - news) SA and Spain's Telefonica SA .
For example, British retailer Dixons Group Plc started its FreeServe service last autumn with no access fees. Users only pay
British Telecommunications Plc for the local phone time while they are online.
Within a few months FreeServe drew more than one million users, surpassing AOL as Britain's top online service, and sparking
a number of other providers to follow suit. Users in France, Spain and Germany clamoring for such alternatives held ''Internet
strikes'' last year aimed at hitting the big telecommunications companies.
And in Germany, France and Scandinavia, new phone companies have started offering Internet access at one rate, combining
access and phone charges.
''We will have a flat rate in Germany this year. We are trying to get the conditions to do this,'' AOL's Sarfeld said.
But he faces a tough task. Besides controlling the connections to German homes, Telekom views T-Online as a critical business.
It plans to turn T-Online into a popular ''portal'' with online shopping, news and clubs, and to expand abroad. |
