It sounds a bit like a new drink. It isn’t though and its implications in Europe could be profound. FRIACO is Flat Rate Internet Access Call Origination – unmetered access for Internet calls. Incumbent telcos in Europe have been fighting against it for several years, saying it would be impossible to implement . . . that the economics don’t add up . . . the PSTN will be overloaded. Now (as of 19 January 2001) it’s been introduced in the UK and it’s close to introduction in Holland and Germany. France looks like being next. Where after that?

Stop the clock, I want to browse

There is little doubt that Internet use is stifled in Europe by the imposition of call charges. In the US, of course, local call charges (to the ISP’s point of presence) are free and call lengths are typically 20-30 minutes long. Crucially, this is ample time to browse and buy online or find that all-important piece of information for school homework . . . all at no cost.

The free internet access services introduced by the likes of Freeserve in the UK have been enormously popular with domestic users. They broke with the previous norm by reducing subscription fees to zero and call charges to local rates, gaining a share of the call revenue from their network operator. As a result, many new Internet users were encouraged to go online. Typical call lengths, though, have stuck at 10-15 minutes long, offering limited scope for a digital economy.

Meanwhile AOL discovered in a poll of members that the overwhelming reason for not staying online for longer was per-minute metered calls.

Going by the book

FRIACO was forced on an unwilling BT in the UK under the conditions of BT’s licence. As a licensed operator, MCIWorldcom requested the provision by BT of connections to enable calls originating on BT’s network and conveyed to these connection points by BT to be transferred to MCI Worldcom’s network. The service would be provided for a fixed (unmetered) charge based on the number of connection points provided by BT and to which MCIWorldcom connects a single tandem circuit with a capacity of 64 kbit/s, rather than a metered charge based on the number of call minutes passing over the connections. The request was limited to calls originating on BT’s network and destined (directly or indirectly) for numbers or number ranges allocated to Internet service providers. BT refused, so it was referred to UK regulator Oftel.

Oftel saw growing evidence of considerable potential demand for unmetered retail internet services and took the view that the market could be seriously distorted by its restriction. As a result it ruled in favour of such connection points. BT then argued it would overload the network and, recognising the potential for this, Oftel subsequently ruled for connection points at local exchanges while it reviewed the arguments. ISPs were livid, as it meant that the vital BT connection between local and regional exchanges was still subject to metering. Following the review, Oftel has now ruled for connections at regional exchanges but with the number of these capped in the first year to avoid overload.

Dutch regulator OPTA subsequently ordered KPN to provide a similar service to MCIWorldcom in November 2000, with the market required to be opened to other operators by July 2001. In the same month, German regulator Reg TP ordered Deutsche Telekom (DT) to do the same. While the response from DT was frosty, senior management now sees following suit as inevitable. Then during January 2001 the French Secretary of State for Industry, a government minister no less, announced that France Telecom will also offer a similar service "in the course of the year".

For governments keen to foster the digital economy in their own countries, FRIACO has now been identified as a key enabler. The EU may be interested in that too.

Who’s the winner?

Everyone’s in with a chance, but it changes the game. ISPs currently relying on sharing revenue from metered Internet calls are likely to see their regular users desert to flat rate subscription services. Revenue from advertising will be affected. Those that move to a subscription model will need to get to grips with billing and ensuring consistent quality of service. Incumbent telcos will want to offload the IP traffic onto the IP overlays they are already building.

On the plus side, new revenue opportunities from e-commerce, interactive games and other entertainment, as well as many new innovative services, will be stimulated. Telcos will be able to go for this as hard as anyone else.

© e-principles 2001

Robin Duke-Woolley

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