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Free phone for Europe ISP
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October 27, 1999: 9:12 a.m. ET
CallNet venture to cover Web-access phone charges -- with conditions
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LONDON (CNNfn) - "Free" Internet access in Europe is about to become even freer due to a new trans-Atlantic venture that promises to absorb the telephone charges users must currently pay to access the Web.
British Internet service provider CallNet is joining forces with Canadian telecommunications company North American Gateway to offer CallNet0800, a new service to be launched next Monday. Like U.K. market leader Freeserve, the service carries no monthly subscription charge and no set-up costs.
But unlike Freeserve and its similar "free" competitors, CallNet also plans to strip out the phone charges that Internet analysts say have impeded the growth of electronic commerce and Internet surfing in Britain and across Europe.
Those charges, according to CallNet Chief Executive Paul Goodman-Simpson, can run to between 1,200 pounds and 1,300 pounds a year - the equivalent of $2,000 or more -- for a user who averages 10 hours online per week.
The catch to the free service is that the venture wants subscribers to use North American Gateway's access code to make regular phone calls. The switch is activated by dialing a '"145" prefix before a telephone number.
"What we're saying to people is 'Look, we'll wipe that (Internet access) cost out for you, but make your other calls through our service and we'll give you discounts (of 30 percent compared with standard British Telecom rates)," Goodman-Simpson told CNNfn.com Wednesday.
Goodman-Simpson said the venture will easily be able to subsidize the phone charges of the additional 200,000 users CallNet expects to sign on by the end of the year. CallNet already has 145,000 subscribers.
The venture -- which also includes British mobile phone retailer Phones4u and F1-Racing Magazine -- is counting on subsidizing the service through revenue from electronic commerce, advertising and as well as through subscribers' use of North American Gateway's phone switch.
Goodman-Simpson insisted the service would be able to handle the 1.5 million to 2 million users the company expects to sign up within the next year or so. Such numbers, if attained, would catapult the service into the top rank of U.K. free-access providers, ahead of current market leader Freeserve, with 1.4 million subscribers, and AOL U.K., with about 600,000 subscribers.
"We have the technology and financial muscle to offer a quality of service that rivals British Telecom even if every single household in the United Kingdom registers," said Peter Gbedemah, the chief executive of North American Gateway's European operations. The U.K. has a population of 55 million.
It remains to be seen whether the CallNet-North American Gateway venture will galvanize Britain's estimated 200 other free ISP's to follow suit by subsidizing phone fees.
Under a new pricing structure recently unveiled by AOL U.K., users who currently pay a monthly fee of 9.99 pounds ($16.57) for the premium subscription service will be charged only 1 pence (1.6 cents) a minute for their phone calls at any time of the day or night. AOL said the lower phone-charge structure would encourage users to go online when they want, as opposed to those times of the day when phone calls are cheapest, at off-peak hours.
Freeserve, for its part, offers a similar promotion under which users receive credit towards future calls for spending a certain amount of time online.
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