America Online, the world's biggest Internet service provider, yesterday struck back at upstart British rival Freeserve which has rapidly overtaken it in the British market by pioneering free Internet access.
AOL Europe, a joint venture with Bertelsmann of Germany, introduced its own subscription-free service, Netscape Online, becoming the latest Internet provider to move to the free access business model.
Freeserve, started a year ago by electrical retailer Dixons, has been copied by about 200 other service providers. In Britain, its success has wrongfooted AOL, which had become the clear market leader in the US through charging a monthly subscription fee.
AOL Europe first responded to Freeserve in May when it cut monthly subscription charges for its 600,000 British subscribers to £9.99 sterling from £16.95 (to #15.15 from #25.71).
In a further attempt to copy the Freeserve model, AOL Europe is linking with a big retailer, Kingfisher, owner of Woolworths, to distribute the free software for the new service.
AOL Europe's decision to follow Freeserve underlines the differences in various countries' Internet markets.
High telephone charges in Britain, together with access fees have discouraged the widespread use of the Internet, but subscription-free services have greatly boosted demand. In contrast, the US market offers free local phone calls for Internet use, enabling service providers to recoup costs through subscriptions.
