PS Consultants - ideas & solutions

Free whatever you want
July 1998

The world has gone mad. At least, the world of internet and telecoms has gone stark staring mad, and seems to have entered a bleeding contest, where the participants are only too eager to slash their wrists to see who faints first.

Dixons didn’t quite start it in the UK with Freeserve, but they certainly got all the hype that was going, and most of the users. How many of these users are genuinely new punters, and how many are old hands with a few “back up accounts” (I know someone boasting about having 5) we’ll probably never know, but the concept of giving things away for free being hailed as a marketing coup, is a little bizarre. But that marketing for you.

But then the electrical discounters, Tempo, got in on the act and added free off-peak local phone calls to their service. How do they do this?

Well, many of your probably already know that the Freeserve concept is financed by a combination of 50p/minute support and the difference between what BT charges you for a local call unit, and what they charge a telco that is using BT for the “local loop”.

Regulars will remember that BT’s control of the local loop – the copper from the local exchange to your gaff – means that everyone else is required to go through BT. There are some areas where cable operates, but to be brutally frank, most cable companies still cannot convince most BT customers that they have anything useful to offer. In fact, all those I know with cable telephones use them for free local calls, but still tend to have a BT phone for when the going gets tough.

So if BT charges Energis 1.6p minute for their use of the BT local loop, and bills the BT customer 3.6p (these are not necessarily the real figures, just for the purposes of this illustration) then Energis/Freeserve trousers 2p for each minute you are on line.

So what’s Tempo’s trick with free off peak calls as well..? Well, for that one, you will need to agree to switch your long distance provider to Tempo’s appointed telecom partner, Localtel. You cannot help notice the adverts in the press offering “30% off long distance calls”, eh? Well,, the Tempo deal assures you of 10% off ling distance, so they are gambling that you will make enough calls during peak times and enough long distance call to cover their costs – which includes 1.6p to BT for every minute your are on line to their service.

So what’s to stop anyone getting an extra phone line for off-peak internet access only..? Frankly, I don’t currently know, and I am tempted to do that and then use it download the Microsoft FTP site at weekends. (NT Service Pack5 crept out the other day, just 34Mbyte)

The connect fees are regulated by Oftel, a fairly typical mixed blessing of regulatory zeal and technology impedance. The same people who largely screwed the chance for the UK to get reasonably priced ISDN a year or so ago when BT was ready to “go for it”; and the same people who don’t bother to reply to email when you write to complain about some awful fax spammer wasting your inkjet ink and paper whilst trying to con your staff in send back a multiple choice competition entry (designed for imbeciles – you know to sort of thing “name the Prime Minister Donald Duck, Tony Blair, Ghengis Khan”. Everyone knows it’s Ghengis Blair). The really fun thing being that the fax spammer has carefully designed a grid on the form so that it goes through the fax very, very slowly indeed at about 5 baud, while clocking up the bill on a £1/minute number.

And BT would naturally like to cut the cost to the punter to 1.6p a minute and pay the long haul operator nothing. Indeed, BT would like to make local free to the consumer, but still charge the long distance telco, and thus completely sink the opportunist business strategies of those willing to give it away. But while the anomaly exists, there are teams of eager salesmen scouring the country to try and get hapless businesses to start their own versions of as free access internet service to “leverage their brand loyalty”. (These people tend to wear suits, have the interests of router manufacturers at heart, and speak in marketing riddles.)

Now we also have free phone calls financed by commercials, following the old internet banner ad game. This is great for the kids’ line, although I wonder everyone was to get two such lines, will someone sell a box to start one call 30 seconds after the other, and auto switch the lines back and forth to avoid the commercials.? Allegedly Energis is using the Noel Edmond brand to promote such a service.

Moreover, Sky has just announced that the £200 digital set-top boxes are going to be free as of next month, providing, of course, you switch your phone calls through them at an overall discount of 40% on BT costs, allegedly.

It’s not often I want to side with BT, but the phone scam has got way, way out of hand, and I would love a genuine marketplace operating, which means it’s time for Oftel to allow BT to permit free local access at all times (well, not exactly, it’s paid for by the quarterly rental) and spare us any more old nonsense from free service providers. It would also help remind those businesspeople who were once sane, that to base an entire commercial strategy on the whim of a regulator was an unwise thing,

Will it happen? Maybe. And possibly even buy the time you read this.