Why online services will continue to be free!

Abstract: This time, Quintessence discusses the growing proliferation of free services on the Web. It more and more looks like free services are not only alive and kicking, but that they are going to shape what online services will look like in the future.


A. The Internet versus Commercial Online Service Providers

In the old days, there were just a few online service providers that all provided a combination of services. Compuserve was one of the first commercial services, then called The Source. The Internet was a separate, non-commercial network mainly used by scientists to access databases. Importantly, from the perspective of such academics, use of the Internet was free! Commercial online service providers such as America Online, Prodigy and Compuserve all featured their own services on an exclusive basis. They each provided their own package of access services, email services, chat services, games, etc. In some cases, users with Apple Computers needed a separate network and interconnection with other networks was minimal. They typically charged for their services with a combined once-off set-up fee, fixed monthly fees and extra usage fees for hours in excess of a certain amount of hours. These commercial service providers typically used their own software.

This has all changed with the growth of the World Wide Web and the proliferation of sophisticated browsers that can be obtained virtually for free. It now becomes more and more clear that the concept of a single provider that will look after all services in isolation from other service providers, is obsolete.

Microsoft set up its own network called MSN, but just after its launch, it decided to become more an Internet Site, rather than a complete and separate Network with local access points everywhere around the world like Compuserve has.

B. Why people turn to Free Services on the Web

Today there still are many Internet Service Providers and most of them do offer services that combine email, web access, FTP, hosting of pages, etc. But people are increasingly using such ISPs for Internet access only and are turning to services that are freely available on the Web. Such free services are more attractive than what the local ISP offers for several reasons, such as:
  • ease of use (examples: online HTML editors, file managers, FTP via browsers, online configuration of guestbooks, counters, WEBchat, WEBemail, etc.)
  • congestion (the local ISP may not be able to support the many hits that popular pages get)
  • visibility (services such as Geocities are popular with special interest groups)
  • scale (see below)

The latter issue of scale weighs heavily in case of services such as chat. It is not fun entering a chatroom and find that there is nobody there to talk to. This is one of the main reasons of the popularity of America Online (AOL) which has some 8M members. Compuserve is a distant second with some 3M members and Compuserve has recently kind of merged with AOL, because Compuserve continued to run at a loss. The situation is still unclear in the Asia-Pacific region, where Fujitsu holds the licence for Compuserve.

But the overall picture is clear. AOL has become successful partly it is the biggest community on the Internet and partly because it offers unlimited access for some $20 per month. This is as cheap as what a cheap telecom supplier such as MCI charges for Internet acces alone. Ozemail grew out to be the biggest ISP in Australia partly because it offers a service without monthly fees (only a $25 set-up fee plus usage charges). In all such cases, the successful ISP offered a degree of freedom that deviated from the standard concept of charging both set-up fees, monthly fees as well as usage fees for excess hours. It seems that, to build up a large membership base, some things have to be provided for free and offering free email and homepages becomes increasingly attractive as the cost of hardware comes down. After all, many people who do not use the Internet regularly do not want to be locked into one specific supplier that may continue to charge monthly fees even if they rarely use the service. Instead, people prefer to use free email addresses and free capacity for their pages, even if this comes with advertising. And the WEB becomes increasingly attractive for advertisers.

ISPs such as Compuserve provide many services in one package, e.g. browsing and email software, email services, chat, business services and, of course, Internet access. But many of the services they offer can now be obtained for free, often at the highest quality. Free browsers now allow people to surf the Web, email and FTP data, create pages, maintain address books, schedulers, lists of popular URLs, etc. The trend is that people are more and more looking at each of these services separately and substitute some of them for services that are provided for free on the Web.

In this light, it becomes clear why Compuserve was running at a loss and why its position was unsustainable. AOL may still receive sufficient revenues, but this is mainly because it simply is the biggest ISP. People who like chat go to AOL, because at least they can expect that there will be some people present to chat with at AOL. Similarly, an email address with such a large ISP seems attractive for people who want to be seen as part of a large community.

But already services such as Geocities are challenging AOL's supremacy. In order to keep its huge membership, AOL has to fight on two fronts: it has to provide services as good as Geocities and it has to provide Internet access at minimal cost. Inevitably AOL will lose the battle on one of these fronts and at that same time it will lose its biggest asset, i.e. the fact that it has the largest number of members. Once there is another service provider that outnumbers AOL, people will go there for chat and for many other services.

C. Competition in Internet Access.

There are more and more places where one can get free Internet access. There are of course many Internet cafes that will offer free Internet access if you buy an otherwise expensive cup of coffee. But there are also many public libraries that have set up Internet computers and offer their members free access. The State Government in Victoria, Australia, is planning to set up public-access kiosks in many public places, such as State schools, court houses, at local councils, railway stations, etc. These kiosks will offer public Internet access, as well as electronic handling of 30 classes of public service transactions, ranging from ordering services and licences to paying associated fees and fines by EFT.

The public Internet kiosks is increasingly recognised as an attractive concept from various perspectives. There still are many people who do not have a computer hooked up to the Internet at home. They may never want one. Furthermore, people become more and more mobile. Those who have a computer at work may not be able to access it when they want to. Some research shows that the great majority of business professionals are away from their desks for an average of at least one day a week. They may not all want to carry an Internet-ready laptop hooked up to a mobile phone with them and even if they do, such a set-up may not always work.

In Queensland, kiosks are emerging in places such as airports, casinos, shopping centres and hotels. Banks are looking at adding Internet functionality to ATMs. In recognition of the huge savings of online services, Queensland's Metway bank has already waived its standard $700 application fee for home loans for borrowers who complete the application on the Internet.

In the US, Micosoft has teamed up with shopping centres to act as hubs from where people can download software and get free Internet access and email services. These services will be offered next year from 201 properties. People will dial the network through local numbers which will patch them directly into the nearest shopping mall, from where people will get free Internet access as well as information and shopping facilities provided by that local mall. Such services will include store listings, receiving customised messages and coupons for special discounts and offers.

Ongoing deregulation and accelerating technological innovation result in ever-decreasing cost of telecommunications. Telecom carriers are more and more looking at providing Internet access as a stand-alone service, i.e. without email, homepages or other additional services. After all, people can get all such services on the Web, in most cases for free!

From various perspectives, the traditional concept of the all-encompassing ISP appears obsolete and the future of the Internet will be shaped by suppliers that provide free services on the Web. For a more detailed description of such free services, go to The Web is free!

D. Conclusion.

Many academics deplore the commercialization of the Internet. Quintessence disagrees. Services that were once available only for privileged groups such as academics are now becoming available for everyone who is interested. Importantly, free Web services will ensure that the world will not be dominated by services suppliers that demand payments, but they will ensure that online services will continue to be free.


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