Business News - Qwest Offers Free Internet Access with Bundled Services

Posted: 10/1999

Qwest Offers Free Internet Access with Bundled Services
By Liz Montalbano

In a move that analysts say is the future of bundled services, Qwest Communications International Inc., Denver, announced it would offer free Internet access to consumers who purchase special long distance calling services.

Qwest's communications package consists of free unlimited dial-up Internet service and 250 minutes of domestic long distance calling service for a flat rate of $24.95 per month. Any domestic minutes beyond the first 250 each month are charged at 10 cents per minute.

Jeffrey Kagan, an Atlanta-based telecom industry analyst, says Qwest's offer represents a new shift in telecom services that mimics retail packages, in which an inexpensive service or product will be offered free when bundled with others.

"We are seeing the beginning of a new wave of marketing voice and data services," he says. "Like in the retail environment, communications companies will start giving away low-cost services as loss leaders to get customers to sign up for a profitable package of services."

He adds that, soon, long distance service also will be offered free when bundled with services that are more profitable for carriers.

"The profits of the future will come from bundles," Kagan says.

Qwest is certainly not the first company to offer free Internet access. Other U.S. companies, including Netzero Inc., Westlake Village, Calif., and AltaVista Co., Palo Alto, Calif., offer it free as well, but rather than bundling it with other services, they are using advertiser sponsorship to subsidize the cost of the service.

Overseas, some European service providers act on a revenue-sharing model, in which an Internet service provider (ISP) and a telco share revenues on the local connection rather than having an end user pay two charges--one to the telco and one to the ISP for access--to offer free Internet access, says Casey Freymuth, president of Group IV Inc., Phoenix.

According to Freymuth, U.K.-based company Freeserve, an online venture between electronics retailer Dixons Group plc and Energis, was the first company to provide free Internet access in this way in Europe. He says the move ousted America Online Inc. (AOL), Dulles, Va., from its No. 1 spot in just a few months, forcing the U.S.-based company to buckle to Freeserve. "This is a multibillion issue to American Online in the United States. They said that they've got no plans to go free, but they had to buckle to Freeserve in the U.K.," Freymuth says.

He adds that if Redmond, Wash.-based Microsoft Corp. begins to offer free Internet access, a plan rumored to be in the works, AOL might have to do the same in the United States.