This article from NYTimes.com has been sent to you by Ruth Burchell [log in to unmask] EASI SUBSCRIBERS Happy New Century everyone. Here is an article on development of internet access. Ruth Burchell [log in to unmask] /-------------------- advertisement -----------------------\ LOOKING FOR A TRULY HIGH-SPEED INTERNET EXPERIENCE? Then visit Alcatel.com and see what makes us the world's leading supplier of DSL solutions. Alcatel, world leader in DSL solutions. http://www.nytimes.com/ads/email/alcatel/index.html \----------------------------------------------------------/ Days of Plenty Are Over at Free Internet Services http://www.nytimes.com/2001/01/01/technology/01FREE.html January 1, 2001 By LAURIE J. FLYNN It is official: the era of unlimited free Internet service is over, an apparent victim of its own popularity. The announcement last week that Bluelight.com would limit the number of hours subscribers could spend on its site signaled the end of an era, albeit a short one even by Internet standards. Over the last couple of years, dozens of companies announced unlimited Internet access for no charge, the only catch being the barrage of advertising that subscribers were forced to endure. But like Juno Online Services and NetZero before it, Bluelight announced that it could no longer support the strain that active users were putting on its network, with a fraction of its subscribers accounting for the large majority of its traffic. Just the week before Bluelight.com's move, NetZero, the market leader, announced that it would start charging subscribers $9.95 after they reached 40 hours in a given month, saying that 12 percent of its subscribers were accounting for half of its telecommunications expenses. And earlier this year, Juno announced a tiered pricing program, whereby customers who pay $9.95 a month receive better service, get more reliable connections and view fewer ads. "The pure free-I.S.P.-for-everyone experiment is over," said Mark Goldstein, chief executive and president of Bluelight, a privately held company that is majority-owned by the Kmart Corporation. Mr. Goldstein said the timing of Bluelight's announcement was not coincidental: his company was trying to head off a migration of NetZero's heaviest customers to Bluelight's free service. Bluelight.com, he said, did not want them; nor did it want the heavy users it already had. "It's like having a late-night club with all the drunks they're the ones you're going to kick out of the bar," Mr. Goldstein said. "They make the worst customers." Mr. Goldstein said that some Bluelight subscribers had been using the service to run their businesses, requiring nearly constant access. NetZero and Juno have reported the same behavior. But while disproportionately active users may have struck the final blow to the free I.S.P. movement, the real culprit was the dismal climate for online advertising. A year ago, when free Internet service providers were just beginning their services, advertising was abundant as was venture financing. Today, there is relatively little of either one for many dot-coms. Last month, Spinway, a San Francisco-based company that provided the underlying technology for Bluelight and free online services from Barnes & Noble and Costco, announced that it could not raise any more capital and was going out of business, handing many of its assets over to Bluelight, its largest customer. That announcement followed shortly after the demise of 1stUp, a Spinway competitor owned by CMGI, the Net holding company. 1stUp, based in San Francisco, was the technology behind free service from Alta Vista and Excite@Home's FreeLane, along with dozens of smaller niche services, like Gay .com, Senior.com and Afronet.com. Shortly after 1stUp's announcement, Alta Vista said that it was canceling its free service; other 1stUp partners are still hoping to find a home someplace else. Back in July, Juno gobbled up two competitors, Freewwweb and WorldSpy, both of which declared bankruptcy and then began referring subscribers to Juno's site. That leaves NetZero and Juno still standing as the industry leaders, each with 3.7 million active users, along with a handful of miscellaneous Web retailers still hoping that sales of merchandise will make up for their free Internet services. But even the two remaining major free providers are walking on rather thin ice these days: like many Internet stocks, shares of both Juno and NetZero, which are embroiled in patent lawsuits against each other over the way ads are displayed on computer screens, have been pummeled in recent weeks. Shares of Juno, which traded at $41.63 in January, closed under a dollar last week. NetZero was also under a dollar, down from a 52-week high of $36.38. Yet rather than disappear entirely, analysts predict that free I.S.P. services are likely to continue in some form, for those customers who do not overuse them. Many analysts say that tiered pricing programs like those announced by Juno and NetZero are the future, and the challenge now is to convert users of the free service into paying customers. Not that long ago, Internet customers bought service by the minute, much like long-distance telephone service for upward of $100 a month for active users. But by the late 1990's, most Internet providers in the United States had modified their business models, switching to flat monthly fees in an effort to gain more revenue from advertisers and electronic commerce and less from subscriptions. It appeared for some players that eliminating the subscription fee altogether was simply the next step. Adding it back now appears to be yet another one. But it could be that major fee- based services like America Online, the Microsoft Network and CompuServe will end up as biggest beneficiaries of the free-I.S.P. shakeout. All three already offer tiered service, with limited plans priced as low as at $9.95. As more active users are removed from free services, analysts say, they may migrate to those more established names rather than pay the amount to a relative newcomer who might not offer the same level of service. NetZero, however, has considerable brand recognition these days, the result of an advertising blitz that includes television spots during N.B.A. games, and the company's chairman and chief executive, Mark R. Goldston, says the company is signing up new subscribers at a record pace. Bluelight, which did not announce tiered pricing but rather that it would remove heavy users entirely, is in a category of its own. Nine out of 10 of its subscribers got their free Bluelight.com CD-ROM starter kit at a Kmart store, meaning that most of its customers are already Kmart shoppers and thus potential online customers. "E-tailing is just another way for a retailer like Kmart to reach its customers," Mr. Goldstein said, rather than a service intended to exist independently. In the meantime, those start-ups that have survived this far are simply relieved to still be standing, amid the rubble of their competitors. "It started out as a consolidation and evolved into a shakeout," Mr. Goldston said. 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