Europe Takes a Step Closer
To Flat-Rate Internet Access
By NEAL E. BOUDETTE
Staff Reporter of THE WALL STREET JOURNAL
Europe is edging closer to tearing down one of its biggest barriers to electronic commerce: the phone charges users pay for every minute they stay online.
In Britain -- amid a crusade by users, newspapers and Internet companies -- the government's e-commerce minister and telecommunications regulator Oftel are preparing to tell British Telecommunications PLC to open its rate structure to allow Internet-service providers to offer unlimited Web access for a flat monthly price.
The minister, Patricia Hewitt, met Oftel Director General David Edmonds, on Thursday. They're expected to talk to BT in the next few weeks.
Ms. Hewitt "is taking this up with Oftel and BT and very much wants to see a range of different tariffs, including flat rates," said Marc Radvanyi, a spokesman for Britain's Department of Trade and Industry.
Time Barrier
Per-minute charges have held back e-commerce in Britain and other European countries because they discourage users from spending long periods surfing the Internet and shopping online. Analysts and many online companies believe the U.S. has the competitive advantage because Americans pay a flat fee for unlimited local phone calls.
Europe has been slow to change because former monopoly phone companies like BT, Deutsche Telekom AG and France Telecom SA earn big money on metered local calls and from their own Internet access divisions.
In the past, politicians and regulators have not pushed the former monopolies into open competition in local phone service and Internet access, especially in France and Germany, where the government is still each carrier's majority shareholder.
'Free the Net'
That's starting to change. In Britain a group of users called CUT (Campaign for Unmetered Telecommunications) has whipped up a storm of public and media outcry for flat-rate access. The Times of London last week launched a "Free the Net" crusade, and other newspapers have joined in. At the same time, AOL Europe, Intel Corp., Microsoft Corp. and other Internet players have been pressing the cause in less public talks with Ms. Hewitt and other officials.
The efforts are paying off. Until now, BT has flatly opposed flat rates, saying they would overload its network. But, under the rising outcry, it has changed its tune. "Different approaches are being looked at. A flat rate is clearly one of them," said BT spokeswoman Aileen Boughen.
Erol Ziya, a cafe owner who serves as CUT's spokesman, is confident that a breakthrough is near. "If you had asked me three weeks ago, I would have said we are a long way off. But now we are getting close."
BT has good reason to resist flat rates. It earns fat profits on long local calls because most of its costs come from making the initial connection. The longer a user stays connected, the thicker its margin grows.
Changing Online Landscape
Freeserve PLC, which became Britain's top ISP last year after offering Internet access with no subscription and only per-minute charges, could be forced to change its whole business model because a large chunk of its revenue comes from money phone companies kick back from their per-minute charges.
Freeserve Chief Executive John Pluthero said unmetered rates are unnecessary because prices are already falling. "AOL PR has done a very good job on this," he said. "I'm not sure we have to change the national system to fit the business model of one U.S. ISP."
A switch in Britain would up the pressure on the rest of Europe, where forces are already mobilizing. "We are lobbying hardest in the U.K. but we are going to go to Germany next," said Claire Gilbert, AOL Europe's general counsel.
Invading the Continental
CUT's notoriety has also spawned similar groups in almost every other European country, such as Internet Ohne Taktung (Internet without metering) in Germany. "We are watching very closely what the English are doing," said Phillip Sudholt, a 23-year-old student who helped start IOT. So far about 20,000 Internet users have signed an online petition that IOT plans to present to the government.
Progress is likely to come more slowly than in Britain. Deutsche Telekom remains firmly opposed to flat rates and has a sympathetic ear in Gerhard Schroeder's Economics Ministry, which has stepped in to temper competition rulings in the past.
"We won't get flat rates tomorrow, but we have to awaken the media to get this into the public discussion," Mr. Sudholt says. "We simply need far cheaper prices to make Internet a mass medium. It is important for Germany."
France is already showing movement. On Thursday, France Telecom's Wanadoo Internet service announced partial flat rates. Users can now get 18 hours of Internet access for 159 francs ($25.47 or 24.24 euros), 10 hours for 99 francs or three hours for 39 francs.
Wanadoo does not plan to launch unlimited flat-rate pricing through standard dial-up any time soon. The company says its current menu of options is better because it allows users to choose the plans that best reflect the number of hours they use.
Write to Neal E. Boudette at neal.boudette@wsj.com
--Kevin J. Delaney contributed to this article. |
