Why pay to play?

If the best things in life are supposed to come free, why is it then that most of Australia's five million Net users still pay to surf? Probably because when "free" is thrown our way, we can't help but ask where the catch is. But the growing trend among smaller ISPs to propagate the "free to play" model is set to change that.

Day by day, they're gaining new recruits, and that's making the "Big Five" a little nervous. Yet, something tells me it's going to take more than a case of the jitters to change the way high rolling ISPs do business. After all, they still have the numbers to make them feel safe - for now. According to IDC Australia the top players making the Big Five include Telstra, which has some 450,000 subscribers; OzEmail with 389,000; One.Net with 125,000, Optus with 114,000 and TPG Internet scoring up to 110,000 as of December last year.

However, Brooke Galloway, senior analyst at IDC Australia, said there are more than 700 ISPs vying for a share of that business. "That's what deregulation does for you," she said, adding: "Size still matters in the ISP world and over 60 per cent of customers are currently tied up with these five large ISPs."

So just how much of a difference can the up-and-coming free model make? According to Galloway, it really depends on what the "pay-to-play" providers do. She said that while the majority of the Big Five's cash flow comes from access subscriptions, this in itself won't be enough to fend off the growing threat the free ISP challenge is posing.

"Like it or not, the pay-to-plays will have to look for other revenue streams. Customers are hearing more and more about the free model and pretty soon they are going to starting asking themselves (and their providers) what they get that is so much better that they have to pay for it," Galloway said. The answer, lies in the value-add basket of the Big Five. This includes higher service levels, content creation options, portal access, Web design and hosting facilities.

As for how free ISPs are expected to survive, let alone make a crust, well you can thank banner advertising and the like for that. Take free-to-play success story GoConnect for instance.

It recently announced plans to boost its subscriber count of 200,000 to an impressive 500,000 by the end of this year. Err, that's just over Telstra's current base! If GoConnect's current count holds true, it means it has also got more than One.Net, Optus and TPG Internet, which positions it in a healthy position to reach its end of year target. Not bad.

Add to that IDC's prediction that the current figure of 5.2 million local Internet users is set to reach 10.2 million by 2004, and the free to play model is bound to make a stash.

Angela_Prodromou@idg.com.au

Editor

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