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AltaVista pulls plug on UK
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August 22, 2000: 7:53 a.m. ET
Net firm cancels access offer, blames BT, disappoints 270,000 customers
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LONDON (CNNfn) - AltaVista made a humiliating U-turn in its plans to grab a larger slice of the British Web access market Tuesday, admitting it had not opened an account for any of the more than a quarter of a million people who responded to its much-hyped offer of unmetered access.
On Tuesday the firm said it had postponed the proposed service, blaming telecom provider British Telecommunications PLC for delaying the introduction of wholesale Internet access service at flat rates.
AltaVista in March announced plans to offer unlimited Internet access to U.K. consumers for a one-time annual fee of £50 ($74). British users normally pay fees metered by the minute to access to the Internet. At the time, even Prime Minister Tony Blair welcomed the new service as a boost for the U.K. online community.
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CNNfn's Tom Bogdanowicz reports from London on AltaVista's UK service on hold.
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Speculation about the number of customers the offer generated has been running high in the media, with several newspapers offering rewards for any subscriber to come forward. Some 270,000 people applied to use the service, but AltaVista has not allowed any of them to log on.
Andy Mitchell, managing director of AltaVista UK, said in a statement that BT could make its service available from January, and said he would work closely with U.K. telecom regulator Oftel to force a speedier solution. U.S. telecom firm WorldCom Inc. (WCOM: Research, Estimates) earlier this year filed a complaint with the regulator about BT's hold on the Internet access market in Britain.
A BT spokeswoman rejected AltaVista's criticism, pointing out that BT has been offering wholesale access to the Internet since June.
"That's entirely in accord with the regulator," said the spokeswoman, although she said no company had yet taken up the offer of a 64 kilo-byte line for £425 per year. "This issue is strictly one for AltaVista," said BT.
"No Internet service provider can afford this," retorted AltaVista.
"The consensus in the industry is that (BT's) prices are unfavorable," said Scott Smith, director of Internet strategy at Yankee Group Europe. He pointed out that many ISPs in Britain were struggling to cope with the surging number of subscribers, many of them receiving new customer applications at the rate of more than 40,000 a month - a rate that experts consider to be a threshold beyond which capacity constraints arise. Hurdles include the finite amount of network infrastructure - mainly owned by BT - available to ISPs.
Popular unmetered services such as those offered by cable operator NTL Inc. (NTLI: Research, Estimates) are experiencing even greater difficulties. NTL had 190,000 Web customers by early August, but had 150,000 more waiting in line.
The picture is complicated because the rapid pace of technological change has left regulators in Europe scrambling to keep up. "The regulators are lagging behind because things move so quickly," Smith told CNNfn.com.
BT is discussing a new offer with the regulator, but no details are yet available. The current Oftel-agreed tariff for wholesale Internet access is likely to need tweaking to take account of additional unavoidable fees that ISPs must pay to provide Web access. It's these fees that the ISPs say make it impractical for them to operate unmetered services under the existing wholesale set-up.
AltaVista is owned by CMGI Inc. (CMGI: Research, Estimates) of the U.S., and was slated for an IPO this year. AltaVista said it would concentrate on developing its search engine function. 
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