The introduction of free Internet access accounts by Gateway Computer later this year will challenge the existing paid-subscription structure of the highly competitive but mostly unprofitable Internet service provider market.
Following a successful roll-out in the US and Britain, Gateway is planning an Irish launch of its Gateway.net free Internet accounts, which will come bundled with its computers, early in the second half of the year, according to Dublin-based senior vice-president for Europe, the Middle East and Africa, Mr Todd Bradley.
Gateway was also considering offering the free service to the general public, he said. Gateway already provides the service in Britain, where retailers such as electronics giant Dixons offer free access to the Internet along with free e-mail addresses and Web page space.
In a similar development Ireland On-Line (IOL) is understood to be considering a move to free account provision as well, ahead of Gateway's offering. However, the company said it had no immediate plans for switching over to a free access model.
"We are currently looking at different access models," said Ms Angela Keegan, head of marketing at IOL. "We're watching closely what is happening in the UK market."
She also cast some doubt on whether Gateway would be able to offer its Internet service in Ireland. "I'm wondering how they are going to do it. My understanding is the regulatory model wouldn't allow [free access] now."
However, industry observers say market restrictions would be more likely to affect companies like Indigo and TINet, Internet service providers (ISPs) owned by Telecom Eireann, or EsatNet, owned by Esat. The telecommunications groups could be seen as benefiting from increased phone traffic while making it difficult for the few remaining independent ISPs, like Club Internet, to compete.
Indigo's managing director, Mr Mark Beggs, said Indigo would keep "every option open" regarding the services it offered subscribers, but expressed doubt that a free access model could work in Ireland at present, primarily because the market was too small.
He noted that the Dixons model in Britain had more than a million subscribers. In contrast, the Irish Internet market is considered unlikely to grow beyond 150,000 anytime soon.
The British free access providers are in search of customers whom they can drive to their own site for product purchases or to other sites which will pay to advertise online. In addition, a more lucrative source of income comes from phone charges, which access providers split with the telephone carrier.
But in Ireland, Telecom's competitors in the telecommunications market must pay an "interconnect" charge every time they need to transfer a voice or data call from or to Telecom's phone system. While Telecom also pays its competitors to use their systems, most of the interconnect charges accrue to Telecom and, under the existing system, ISPs say they would not be able to make enough revenue from customer call charges to make free access viable.
Furthermore, the total spend for Internet advertising in Ireland for 1999 will probably only equal £2 million, said one source. At present ISPs are reliant for most income on the average £12 monthly subscription fee paid by subscribers.
