AOL UK Flat-Rate Internet Plan: Sooner or Later?

In the complicated and frustrating world that is U.K.

Internet access, the hottest question is, will AOL U.K. -- the division of AOL Europe GmbH -- begin offering unmetered, flat-rate Internet access within the next six weeks? During a week that has seen a media firestorm arise out of AltaVista Co.'s admission on Monday that its U.K. unmetered access product was "being put on hold," AOL U.K. is being careful in playing its next move.

"We are going to offer flat-rate, unmetered access as soon as we can. It could be in six weeks; it could take longer," said Matt Peacock, director of corporate communications at AOL Europe. AOL Europe is jointly owned by the U.S.-based ISP (Internet service provider) powerhouse America Online Inc. and German publishing giant Bertelsmann AG.

AOL U.K. points to British Telecommunications PLC (BT), the former U.K. national monopoly, as being the major roadblock in its ongoing effort to launch a flat-rate, unmetered Internet service in the U.K. "We are angrier than ever with BT. It has failed to act, and BT has not done what the U.K. regulators have told them to do. It amounts to a betrayal of the U.K. consumer by BT," Peacock said.

Last May, the government agency that regulates the U.K. telecommunications industry, the Office of Telecommunications (Oftel), issued what it called a "Direction" requiring BT to provide an unmetered wholesale product to other operators, allowing both operators and ISPs access to BT's local network.

In admitting that its flat-rate Internet access plan -- allegedly launched on June 30 to 250,000 customers signed up for the service -- wasn't actually in operation, AltaVista's chief executive officer Andy Mitchell blamed British Telecom, saying BT hadn't offered a competitive enough wholesale package to ISPs. It is a claim vehemently supported by AOL U.K. and just as strongly denied by BT.

BT's director of regulatory affairs, Ian Morfett, in a statement released by BT on Aug. 22, accused AltaVista of "standing reality on its head as it tries to wriggle away from the consequences of its ill-considered marketing hype."

Defending its position, Morfett said, "There's been a BT wholesale unmetered product (FRIACO -- Flat Rate Internet Access Call Origination), agreed with the regulator, that has been on the table since the end of May. That no other operator had taken it up says more about the difficulty of establishing credible business models than it does about BT's innovation and competitiveness."

Morfett added that "BT is continuing to innovate, and has offered enhancements to FRIACO following discussions with the industry. One operator has now taken this up, having signed up this morning."

U.S. carrier WorldCom Inc. is that first company to sign up to BT's wholesale unmetered Net access product, FRIACO Hybrid, confirmed WorldCom spokeswoman Charlotte Steele, though she declined to comment on any pricing agreement between the two companies. The fact that WorldCom is one of AOL U.K.'s network vendors led to immediate speculation in the U.K. media that AOL U.K. was about to offer its own flat-rate, unmetered service.

"WorldCom is one of our many vendors, and we have already asked them for pricing information," AOL U.K.'s Peacock conceded. But AOL U.K.'s deep suspicion of BT is keeping the ISP from making any predictions about its flat rate unmetered Internet service.

"We're not sure if BT has even given WorldCom a price. We can't even begin to put a flat-rate offer in place until we have wholesale prices from BT," Peacock said.

AOL U.K. argues that BT's current wholesale package is incomplete, due to a technicality concerning full access to the local and regional exchanges on BT's network. BT's wholesale flat-rate package does not cover Internet calls that go from the local exchange to the regional exchange (basically from a user's telephone in their home to the network in the street), only covering the part of the call involved in the regional exchange to the ISP itself.

When Oftel issued its directive in May, it reserved issuing a firm ruling over what sort of access BT would have to provide to its local exchange, saying that Oftel would conduct a study and issue a decision in June. That report has yet to arrive. "We are waiting on details of the technical report and are expecting it in the next few weeks," a spokesman for Oftel said.

But Oftel was quick to point out that it believes that BT's FRIACO Hybrid product, which it is selling to WorldCom, covers the missing piece, the local to regional exchange, in BT's wholesale offering. Therefore, the need for Oftel's official report is not urgent when it comes to an ISP's ability to offer unmetered access to the Internet to the U.K. consumer.

"Oftel wants to see competition in unmetered Internet access develop," said David Edmonds, Director General of Telecommunications for Oftel in his official statement on Aug. 22 to which the Oftel spokesman deferred.

"BT offered this product, known as FRIACO -- Flat Rate Internet Access Call Origination -- from 1 June. Further industry discussion has resulted in a further refinement of the product known as FRIACO Hybrid. BT has offered FRIACO Hybrid since 3 August. I am confident that this provides a sound basis to promote competition in unmetered Internet access and expect to see more companies providing unmetered Internet access packages in the coming months," Edmonds said.

Erol Ziya, the press officer of lobby group Campaign for Unmetered Telecommunications (CUT) also believes that Tuesday's deal between BT and WorldCom will result in unmetered, flat-rate service in the U.K. soon. "I would expect to see it in the next four to eight weeks," Ziya said.

Reporters "know that CUT and AOL U.K. have a close relationship ,so when I've said that we expect unmetered access in as little as four weeks, (they) added two and two together and came up with AOL specifically. I haven't said that.

But my sources do tell me that negotiations have been going on (over a complete wholesale ISP unmetered package), and that they are very close to a conclusion.

It's only a matter of time before a (large scale commercial unmetered Internet access service) follows," Ziya said.

But will that service come from AOL U.K.? "The more time that passes, the more we're looking into doing things without BT," said AOL U.K.'s Peacock. But Peacock stressed that AOL U.K. would not make an unmetered product available until the company was certain it could deliver the service to the consumer at a reasonable price which AOL knows it can afford.

"There is a danger that all of this confusion, caused in part by AltaVista's crass behavior, will cause the U.K. consumer to turn away from using the Internet. But we do not blame AltaVista for hanging on to something that BT should have long ago supplied to U.K. consumers," Peacock said.

In the meantime, Internet users in the U.K. continue to wait for the affordable and reliable 24-hour flat-rate Internet access enjoyed by their U.S. cousins.

AOL U.K., in London, can be contacted at +44-207-348-8000 or at BT, in London, can be reached at +44-207-356-5000 or at Oftel, located in London, can be contacted at +44-171-634-8750 or at Freeserve, in Hertfordshire, England, can be contacted at +44-1442-353000 or at

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