Oftel plan threatens free Net access

THE TELECOMS industry is planning wholesale changes to the cost of Internet calls in a move that could undermine the viability of Freeserve, the new free Internet service from Dixons, just four months after it was launched.

Oftel, the telecoms watchdog, will next month issue a paper outlining changes to the regime covering calls to local rate numbers. The paper will suggest that local operators such as British Telecom and Cable & Wireless Communications should keep a greater proportion of the cost of the calls than currently allowed.

If accepted, the proposal would raise the cost of Internet access and threaten the profitability of services such as Freeserve. The scheme, under which Internet users pay nothing but local call costs to surf the Net, has taken off since it was launched in September.

Yesterday, Dixons said the service had signed up 900,000 new users, making it the largest Internet service provider in the UK ahead of America Online.

The changes being mooted by Oftel mean Freeserve could have to start charging. Oftel is responding to complaints that the surge of Internet users is overloading local networks.

The problem stems from the Number Translation Service (NTS), the scheme that decides how the cost of a local call is divided between BT and the company operating the local call rate service. BT currently keeps a third of the cost of the call - enough to cover its basic costs but not to make a profit.

However, Internet providers now rely on the NTS regime to subsidise their service. BT and the cable operators complain that the explosion of Internet traffic is clogging up their networks with no financial incentive to invest in new capacity.