As Excite launches the latest unmetered internet service into the UK market, analyst Lars Godell of Forrester Research has predicted the death of flat-rate internet usage within two years. In an article for Forrester’s UK arm Fletcher Research, Godell says that while the competing offers of unmetered access from the likes of AltaVista and Telewest will “stir Europe’s net access markets, an unsustainable business model will kill the idea.”
He points out three main reasons for this unsustainability. Firstly, while unmetered internet access may help bring customers in, price wars will not keep them loyal. “Customer acquisition costs and churn skyrocket and differentiation evaporates,” he warns.
The second point Godell makes is that profits will not come quickly enough for free ISPs, which were already losing money even whilst taking revenue from call charges. Without this share of call revenues from telcos, ecommerce and advertising revenue alone would not support the business model. Finally, the advent of internet access via devices other than PCs is expected to make free services too costly to maintain.
Once the free ride is over, Godell predicts that customers will split between those that want cheap, low customer service options or more expensive providers with 24-hour servicing. He also sees cross-channel providers such as BT dominating the market, while existing free ISPs will partner with telcos, in order that the once-again-paying customer can obtain value in the form of access beyond the PC.
