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AltaVista cut U.K. Web fees
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March 6, 2000: 10:40 a.m. ET
U.S. Internet company will offer initial flat rate of up to $79; challenge to rivals
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LONDON (CNNfn) - U.S. Internet company AltaVista sent tremors through the British online industry Monday by promising users unlimited Web access for an up-front fee of up to 50 pounds ($79), followed by smaller annual renewal charges.
The offer turned up the heat on Internet service providers in Britain. Their often high subscription rates, coupled with the per-minute fees for phone access - sometimes including a slice of commission for the ISP - have been as the biggest deterrent to wider Internet use in Europe, analysts say.
Prime Minister Tony Blair - an advocate of the Internet, who has even appointed an e-commerce minister to promote cyber commerce - hailed AltaVista's move Monday as "good for business and consumers." Blair's comments came a day before he is set to deliver a speech calling for an end to the "digital divide" on the Internet by making access cheaper and more widely available.
A government-commissioned report due out Tuesday in Britain is expected to illustrate the nature of the current divide, with figures showing that 45 percent of the Web "literate" are aged between 15 and 24, while 48 percent of Web users are in the top two socio-economic tiers.
AltaVista said it plans to connect users to the Internet for an upfront joining fee ranging from 30 to 50 pounds , followed by an annual renewal fee of between 10 and 20 pounds. The company said it plans to launch the new service within the next three months, and estimates it will save British surfers nearly 700 million pounds a year.
The company told CNNfn it ultimately hopes to roll out similar flat-fee services across Europe, with rates determined according to each country's unique telecom environment.
AltaVista cited research conducted on its behalf by Datamonitor showing that the annual cost to the consumer of going online with "free" Internet services such as Freeserve or Btclick.com is 126 pounds a year, the price of the local-rate phone calls. With America Online (AOL: Research, Estimates), the company said, the cost can rise to 198 pounds a year.
AltaVista is controlled by Internet investment company CMGI Inc. (CMGI: Research, Estimates), which has said it plans to seek a listing for the Web search engine.
Shares of Freeserve (FRE) fell nearly 5 percent in London Monday on the back of the AltaVista move. But BT (BT-A) shares rose just under 1 percent.
Freeserve has proven enormously popular in Britain, where it pioneered "free" web access when it launched in 1998, spurring a spate of copycat providers. But critics say the service is free in title only, since users are obligated to pay phone fees for every minute they remain on line.
British Telecommunications, for its part, has promised to roll out its own unmetered access plan this Spring. AOL, meanwhile, has expressed support for unmetered access and is reportedly studying AltaVista's plan.
AltaVista said Monday its new service is currently undergoing testing to ensure that it is stable.
"The U.K. is still lagging behind the U.S. when it comes to the Internet, and this is mainly caused by the high phone charges imposed by the likes of BT," Andy Mitchell, the managing director of AltaVista U.K. said in a statement.
"By announcing free monthly access and free calls, AltaVista is hoping to increase the number of people online and the number of Internet-related jobs, which in turn will boost the British economy and place us in a competitive position with the United States." 
--from staff and wire reports
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