Sig, Is free DSL the next trend? Do you equate that with the free PC trend that went nowhere fast? :)Leigh
"http://www.zdnet.com/zdnn/stories/news/0,4586,2487593,00.html
Free DSL anyone?
A Southern California company starts serving up high-speed Internet connections at no charge.
By Dick Satran, Reuters
UPDATED March 30, 2000 12:49 PM PT
SAN FRANCISCO -- The free lunch known as the Internet puts a hot new item on its menu next week when a Southern California company starts serving up high-speed Internet connections at no charge.
Free Internet access is already booming, with millions of accounts in use -- Kmart Corp. alone has signed a million users for its bluelight.com service, and NetZero has 3 million signed. It's by far the fastest-growing segment for U.S. Internet service.
So far, the free services have been for low-speed access, although some have offered high-speed services at no cost as long as users collect required bonus points by making online purchases.
But the Broadband Digital Group of Newport Beach, Calif., is staging the first major rollout of a national service offering high-speed, or "broadband," access for no monthly charge.
Giving stuff away has been the marketing model on the Internet since the earliest days, when Netscape and Microsoft (Nasdaq: MSFT) tripped over each other to get their browsers onto computer users' screens. Content and software are regularly handed out at no charge to consumers.
But who pays?
"You've got to pay for it somewhere," said Ryan Steelberg, president and co-founder of the Broadband Digital free service. "We're trying to disclose as much of our financial model as possible so consumers aren't confused."
Broadband Digital will give away its 144-kilobit-per-second service, which is about three times as fast as the widely used 56K services, he explained. Customers must agree to become direct marketing subjects -- special ads will be targeted at the service and demographic data will be collected on customers' Web habits. No data will be compiled on individuals, thus meeting privacy concerns.
Even with those revenue streams, the basic free service "won't be profitable," Steelberg concedes. Instead, Broadband will try to sell consumers on the idea of still higher-speed access -- and it will charge for the premium services.
Misleading hype
Forget the hype in TV ads that say Internet access is a "basic right" of consumers. Steelberg says the truth is that "high-speed service is expensive" and the Internet "will never replace broadcasting," which can profit by selling pricey ads on programming sent to a mass audience.
To be sure, Steelberg says, the high-speed Internet offers a whole new range of e-commerce possibilities because it offers the instant gratification of a connection that's always on and a "fat pipe" that can suck down more sophisticated digital goods. Video on demand and music downloads, which take forever on existing slow-speed systems, become quick work for high-speed ones.
Some retailers will even pay for their customers to get high-speed access, in the right situation, because it helps them sell stuff. Online brokerage E-Trade Group Inc. has begun giving high-speed access to active investors. "It lets people enjoy trading more if they are getting content and transactions more quickly," said E-Trade marketing manager Brent Blackaby.
Broadband Digital has a system that lets it "turn up the juice" for a subscriber who wants to use a higher-speed connection for a short time. A marketer of a video or a software package can pay for the high-speed download as a way to entice customers.
The high-speed access industry says the growth of "DSL," or digital subscriber lines, is being spurred by companies trying to pipe far more services and digital products into homes.
"DSL is a broadband mechanism that has the potential to turn advertising into sales," said Bill Rodey of DSL Forum. "You can get some pretty compelling stuff over a high-speed link. Just look at E-Trade -- they are going to get more trades that way."
Growth of free services
"You're going to see a lot more free broadband," said Cynthia Brumfield of consulting group Broadband Intelligence. "You can give it away free and make money off other revenue streams."
But even with all of the marketing advantages and the ability for lightning-fast Internet ordering, the high-speed access won't pay for itself "for a long time into the future," Brumfield said.
Are the services viable? "Viable may not be part of the equation," Brumfield said. "A lot of things don't make money in this Internet economy. But investors are still plowing money into them."
The seed money to get Broadband Digital launched came from their first Internet startup, AdForce, which was sold to CMGI for $500 million last year, and they plan additional venture capital funding soon.
That money will go to wire some of the 700,000 people who have already signed up for the service. He expects to have 1.25 million users hooked up to the service by the end of next year, and predicts that his will be the largest DSL service by that time. Half of the users will have free service, he predicts, and half will be paying for the premium service that runs more than twice as fast.
Demand is far outpacing Broadband's ability to hook up users. Even using its most optimistic scenario, it won't reach everybody by year end. But to keep customers on the line, it will give low-speed access immediately to anybody who signs up now, at no charge. Free lunch anyone? |
