Internet cost-cutting trends


WASHINGTON -- Americans pride themselves on leading the world in the digital quest to conquer cyberspace. But Britain, which introduced the first mass postal service some 160 years ago, has leaped ahead by letting anyone with a computer and a phone line access the Internet at no cost.

Dozens of Internet service providers now offer Britons free unlimited access to the Internet, along with e-mail and large blocks of data storage space. Earlier this month, giant British Telecom waived all access fees for its online customers.

How long before this tide crosses the Atlantic? No doubt, that question must vex the folks at America Online Inc., which has upwards of 16 million paid Internet subscribers in the United States.

There's nothing truly new here: Inexpensive safety razors induced shavers to purchase blades. Nowadays, cheap cameras prompt customers to buy film. Most U.S. newspapers are priced below cost and depend on advertising to keep them whole.

The Brits have come up with various marketing gimmicks to offset the newly free links. (British Telecom can recoup because local calls to the Internet are usually metered.)

Meanwhile, Internet technology is fast changing conventional pricing for telecommunications.

Consequently, U.S. phone firms may soon move toward flat rate billing, without regard to time or distance.

To be sure, the mobile phone market remains an unholy mess. While digital connections, which are better than analog ones, are taking hold, uniform standards have yet to be set. Moreover, regulators need to forge regional mobile networks into a cohesive national grid. And the policy of charging the party who gets a call, rather than the party who makes one, makes no sense.

In the world, there are some 800 million fixed-line subscribers, about 200 million mobile phone users and 200 million people hooked up to the Internet, about a third of them in the United States.

By 2005, according to projections by Motorola, there will be 1 billion fixed-line, 1 billion wireless and 1 billion Internet users. (Motorola has recently placed some big bets that a large chunk of these people will be wireless Internet users.)

Esther Dyson was among the first of a growing group of digital gurus who correctly sensed that information prices would fall on the Internet. Says Ms. Dyson: "While not all content will be free, the new economic dynamic will operate as if it were."

That's one reason why few Internet firms, aside from those in the connectivity business, make money. Some are draining capital fast. Competition is rising because barriers to new entrants remain nil. So far, the winners are the world's consumers, who are getting more and better choices at ever lower prices.

Andrew J. Glass is a Washington-based columnist for Cox Newspapers.

Pub Date: 2/19/99

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