i4free too clever by half

Funny week, last week. But, then, it usually is when an IT story makes mainstream headlines. When this happens, it's not necessary for people to really understand the issues, but it helps if there's a villain.

Funny week, last week. But, then, it usually is when an IT story makes mainstream headlines. When this happens, it’s not necessary for people to really understand the issues, but it helps if there’s a villain. Like Microsoft. Or Telecom.

So Telecom cut off 0867 dial-up service to the fledgling free ISP i4free and two sibling companies who loaned their 0867 numbers to it. No doubt about that. But can we really believe that i4free, its parent company CallPlus and their new carrier of choice, Clear, didn’t know what would happen if they diverted their Telecom-ordained 0867 numbers to Clear’s network?

There was even a precedent — Web Internet, which arguably had a better case, because its 0867 service was not working — got the chop last November.

And, as Telecom repeatedly told i4free, diverting an 0867 number to the Clear network — even with the additional twist of diversion to a Telecom number associated with Clear via the number portability pact — breached the terms of 0867 service.

Whether Telecom’s terms are fair — they manifestly are not — is beside the point. The expressions of shock and surprise at Telecom’s actions were simply disingenuous. The only hope that i4free may have had is that Telecom might have chosen to avoid the bad publicity associated with cutting off service. Given Telecom’s track record that was always going to be a slim hope.

So Telecom walked into the line of fire. The Deputy Prime Minister — whose party looks likely to seize on competition issues to brand itself — declared it an anti-competitive outrage. An i4free press release tastefully headed “Telecom chops off Muscular Dystrophy Association” piled on the bad PR.

Clear, with both the telecommunications inquiry and interconnection talks imminent, scored useful points without having to really play its hand.

Ihug, which didn’t need to be involved at all, has shot itself in the foot by blocking its customers access to i4free’s Web site — bolstering i4free’s renegade credentials, embarrassing Ihug staff and damaging its brand.

Ihug’s move, like last week’s injunction allowing it to continue its 0867 use in the short term, is a bonus for i4free, whose main hazard at the moment is a tendency to look too clever by half.

If the issues here are common to most modern telecommunications markets, the details are exquisitely our own. Telecom continues to be bitten back by its own deals. Its scrapping of an inconvenient interconnection agreement when the money started to flow the wrong way undermined any credibility the 0867 plan might have had. Now it looks bad in enforcing its own heavily skewed rules.

In the past, that might not have mattered. But Telecom might not be its own regulator for much longer. This matters to i4free, because its own revenue right now is entirely dependent on an arbitrage system which sees Clear pass on to i4free and CallPlus some of the two cents a minute it gets from Telecom for terminating calls in its network. However Clear and Telecom’s new interconnect agreement looks, it won’t look like this.

In the longer term, i4free says its revenue will flow from advertisers and affiliate partners who will have access to its customers and aggregated information about those customers. This is yet to be proven as a robust model, even in the US, where the online advertising spend per user is about 10 times that here. In Australia, no free ISPs are making money and two of the big ones have already changed their models. Some appear to be misleading “subscribers” and potential investors.

That doesn’t mean that the free ISP model doesn’t deserve a chance. But the sooner we can get past the silly idea of free ISPs as some sort of crusaders for the public good, the better. Travel.co.nz’s “passionate” message of support for i4free in its battle with Telecom, urging New Zealanders to visit the i4free site and “record their support” by giving over their email addresses was absurd.

Travel.co.nz is a business partner of i4free. Every “recording of support” is another email address in the marketing database. And it is stretching it to portray i4free as the plucky little guy. Indeed, one of its principal backers, Paul Meier, has key stakes in National Mail and FlyingPig.co.nz and looks set to become a leading light in the new e-establishment.

I4free has the backing to lose money until either the revenue kicks in, someone wants to buy its customer base or the whole thing is called off (CallPlus guarantees the survival of i4free addresses in perpetuity should that happen). It is collecting its customers’ existing email addresses without guaranteeing that its privacy policy won’t change.

This is all irksome to those companies trying to sell Internet access as a service, and to plan for their own medium-term futures. Ihug, for example, has dented its bottom line in making $US33 million in commitments over the next four years for international bandwidth it might not need — but can’t afford to risk going without.

Even a temporary flourishing of free ISPs also comes at the wrong time for Ihug, which wants Force shareholders to vote their confidence in its future. Ihug’s Nick Wood says the free model degrades his market. He has every right to say so, and had he limited himself to saying so, he might be looking very wise in a year’s time.

But what Wood does not have a right to do is declare parts of the Internet he finds personally inconvenient off-limits to his customers. Comparisons with TV networks refusing each others’ advertising are inappropriate. TV networks own their own content and distribution. Wood’s company provides access to the Internet — it does not own it. He would do well to remember that.

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