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By Joey Gardiner, 6 January 2000 18:04

NEWS Freeserve has announced its second quarterly results showing losses of £3.6m. The free ISP's active users are up 12 per cent on the previous quarter - just exceeding growth in the Internet sector as a whole, according to analysts, Datamonitor. Freeserve reported the £3.6m losses for the 12 weeks to 13 November - down from £5m in the previous quarter - on turnover of £3.8m. It said it had also reduced churn - the number of customers starting accounts and then letting them fall dormant - from 9.5 to 7.7 per cent. John Pluthero, CEO of Freeserve, said that the figures were strong and reflected Freeserve's position as the UK's leading ISP and portal. However, analysts have expressed concern that the free ISP model pioneered by Freeserve may struggle to find revenue and retain customers in the long term. Ashim Pal, programme director at analyst house, Meta Group, said that despite the company's high profile, it still had to prove where it was going to earn its money from. Pal said: "The problem is how they move from a revenue-sharing model, based on a percentage of call charges, to other sources of funding. As unmetered local calls become a reality, over time this business model will be eroded." But Chris Tant, analyst at Datamonitor, said Freeserve is in a perfect position to take advantage of this change. "These results show that Freeserve is now the first ISP where revenues from advertising and ecommerce are now beating call charge revenue... it is ideally placed to compete and adapt."