World Online backs out of unmetered access

NEWS In today's U-turn, World Online announced that users of its Freedom 24 scheme who previously paid £14.99 a month for unlimited internet use, would now be restricted to 100 hours per month, after which 1p a minute will be charged. Users of the Freedom Lite model, which previously offered unlimited off-peak access will now get only 50 hours per month, with a similar charge of 1p per minute after that. David Watson, a spokesman for World Online, denied the move is a U-turn on earlier promises and insisted 80 per cent of existing customers would still qualify for unmetered access. However, he admitted that some of the higher end users were unhappy. Last month World Online admitted it was subsidising the unmetered service by up to £700 per month for some users. It planned to recoup this investment by targeting future broadband services at this vital high-end user segment. Watson told silicon.com: "When we launched Freedom 24 we expected Friaco (BT's discounted bandwidth to ISPs) would be rolled out by July. The time between that promise and commercial reality has grown. But this is a short term action. Once Friaco is widely available we will revise the pricing structure." Analysts were not surprised by today's news. Simon Jones, consultant at Ovum, suggested that World Online was reacting to AOL's new unmetered access model. Jones said: "It's interesting that the announcement comes just a day after AOL claimed to have cracked Friaco. AOL are pitching their model at families. World Online are pitching at high-end users. They were running that model by heavily subsidising users. The losses were once worth the risk, but now it's probably not worth it. Now that AOL have done, it's only a matter of time before other companies start cracking Friaco, and they could be World Online's competition." James Eibisch, research manager at IDC, said that an unprofitable model such as World Online's was always going to be unworkable. He said: "Its service was based on subsidising users and that is not a sustainable model. It highlights the risk of gambling on a short-term service and hoping to make up the shortfall in the long run. Grabbing market share is good publicity, but in terms of a good, solid service, it's dreadful." Graham Fisher, analyst at Bloor Research, agreed that World Online put publicity before common sense. Fisher added: "World Online wanted to be there first. It's a good idea and good publicity, but you put an offer out and everybody wants it. That £700 a head adds up, they should have known the market."