Limit of 10 hours freenet

By CHRIS BARTON

Another free internet provider, freenet, has scaled back services, limiting its subscribers' free access to 10 hours a month and charging $14.75 a month for use beyond that.

The move follows i4free's decision on January 6 to continue its free service but "with a smaller pool of access modems."

It has encouraged its 145,000 registered users to switch to slingshot.co.nz for $14.95 a month.

That leaves Clear Communications' zfree as the only big provider of unlimited free internet - although it stopped accepting new subscribers in December when registrations reached 250,000.

Spokeswoman Rochelle Lockley said about half of those registered were active users and the temporary halt would allow zfree time to cull out inactive users and those with multiple registrations.

"The access component is remaining free for the foreseeable future.

"We have no plans to introduce charges. We strongly believe in the model," she said.

Ms Lockley said zfree would continue to build revenue from advertising banners on its website and from cross-selling Clear's phone services to zfree users.

Karim Hussona, chief executive of freenet's parent company, Compass Communications, said changes to interconnect agreements between Clear and Telecom meant it was no longer viable to provide a totally free service.

Both freenet and i4free had been receiving a share of an estimated $40 million a year in termination payments made by Telecom to Clear for data traffic passing from Telecom's to Clear's network.

But the free providers' share of the payments ceased at the end of last year after the interconnect agreement was renegotiated.

"We never thought the interconnect regime would last forever," said Mr Hussona.

"Our service has been profitable, but it's almost an artificial profit that's come through the interconnect regime."

The new deal for freenet's existing 55,000 active customers is similar to the service that was offered by the company when it launched last February: 10 hours a month free access and $19.95 for 300 hours a month after that.

Mr Hussona said that freenet was forced to move to unlimited free access with the arrival of competitors i4free and zfree in April.

He said the market had changed again.

Largely through lower costs in international bandwidth after the opening of the Southern Cross cable, freenet could offer unlimited access for $14.75 a month - about $10 a month less than Telecom Xtra and ihug charged.

www.freenet.co.nz