Free Net access services get Oftel reprieve

OFTEL, the telecoms watchdog, has reprieved free Internet services by rejecting a plea from British Telecom to change the system of charging for Internet-related calls.

In a paper published yesterday David Edmonds, Oftel director-general, proposed not to change the current charging structure, known as the Number Translation Service, for the next two-and-a-half years.

The proposal is a reprieve for Freeserve, the free Net service provided by retailer Dixons, and a host of similar providers. The services, which have grown explosively since their launch last year, have abandoned fixed charges for Net access, choosing to rely only on the revenue they make from local calls.

The proposal is also a victory for telecoms operators such as Energis, Colt and Scottish Telecom, which have lobbied heavily against any changes.

The services rely on the NTS formula, which allows them to keep a large share of the revenue earned from a local telephone call, while BT and other local network operators such as Cable & Wireless Communications keep a relatively small amount.

BT and CWC argued that the Internet explosion was clogging up their local networks, but the NTS formula gave them no incentive to invest in extra capacity. The companies had lobbied to keep a greater share of local revenues, which would probably have forced operators such as Freeserve to start charging for their service.

Mr Edmonds said: "A decision potentially increasing charges to consumers is not justified on the evidence I have considered. I do not see the need to change the principle of the NTS formula in the short term." He said Oftel would consider the issue again when revising BT's price controls. The current pricing regime ends in August 2001.

Mr Edmonds challenged Internet providers to make the cost of accessing the Net even lower by finding alternative sources of revenue. "A service that is supported through advertising and sales on the website could be priced below the current local call rate," he said, pointing to BT's plans to introduce a new set of price points by year-end.

Some observers believe the cost of Internet calls could fall to zero as service providers make revenues from other sources. X-Stream, the Internet company that pioneered the Freeserve concept, this week trialled a dial- up Internet service using an 0800 number, which is free of charge to the user.