AltaVista Drops Free UK Net Access Plan

Three months after hailing its proposal to offer UK Internet users a flat rate for unlimited Web access as the second great online revolution, AltaVista has shelved the proposal indefinitely.

AltaVista is casting blame for the failure of its unmetered service largely on British Telecom (BT), saying that the UK’s dominant telecom firm did not offer the ISP adequate flat-rate access to local phone lines. The majority of UK Internet users pay by the minute, and many have plans that automatically disconnect them after five minutes of inactivity.

Best Laid Plans

In May, a ruling by UK telecom regulator Oftel essentially forced BT to open its network to service providers that were willing to offer flat-rate service. AltaVista then announced an agreement with Claranet, one of the UK’s largest service providers, to provide the service, which was priced at 51 pounds UK (76 US$). At the time, one executive called the plan “the biggest change in the Internet since its inception.”

Despite having signed up about 274,000 customers in advance of the roll-out, which was originally pegged for late July, AltaVista confirmed late Monday that it is pulling its service. The company’s silence on its plans in recent weeks led to speculation that it was running into trouble.

Assigning Blame

In a statement, the U.S.-based Internet firm blamed the plan’s failure on “the current state of the UK telecom market.” While British Telecom insists it adhered to Oftel’s ruling, analysts say the lack of competition for local telephone service doomed AltaVista’s plan.

“We are reliant on the provision of flat-rate circuits from BT,” AltaVista managing director Andy Mitchell said. “To date BT has failed to make this possible, and its continuing delays make it difficult to plan a solution.”

Recheck the Figures

Analyst Jason Streets of UBS Warburg told Reuters that the numbers just do not add up yet.

“They probably announced it too soon, before they worked out the full cost implications,” he said. “I think somebody somewhere did the sums wrong about what the true cost of supplying this service would be.”

While the company maintains that pulling the service will not hurt it financially or lead to layoffs, the debacle is clearly a public relations disaster in the United Kingdom. Media outlets are calling on the company to explain why it remained silent on the issue for so long amid rampant speculation that the service was in trouble.

Silence Hurts

“In hindsight, we might have done a better job of keeping the public informed,” the company said in its statement.

AltaVista is majority owned by Internet incubator CMGI, Inc. of Andover, Massachusetts. Earlier this year, the portal delayed its own initial public offering in the face of market turbulence surrounding high-tech stocks.

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