Dixons ISP venture exasperates vendors

Internet Warnings all around as retailer launches free service.

Dixons Group has barged into the ISP market with its free internet service, Freeserve, infuriating its rivals and setting a precedent that could be the death knell for small companies in the UK.

The high street retailer has brought in Energis, Planet Online and the Press Association to establish the operation that it claimed was totally free. The free CDs that provide access to the service are available through Dixons, Currys, PC World and The Link. Technical support will be the only cost, charged at #1 per minute. Lycos and a raft of online retailers are supporting the portal. Asda, Heinz and financial institutions are tipped to follow Dixons' lead.

John Clare, chief executive of Dixons, said: 'For Dixons, it is a foothold in the online market. As a retailer, I know of no shops that charge an entry fee. We believe that by removing monthly subscription charges, Freeserve will revolutionise the internet.'

But a representative for BT Internet responded: 'Quality and the level of service are very important. Internet virgins will require a lot of help, but #60 for an hour is very expensive. BT would not want to impede the take-up of the internet with such a cost.'

Nick Gibson, analyst at Durlacher, said: 'It will raise a lot of questions.

If I was an ISP I would be very worried. About 35 per cent of the PCs sold in the UK come through Dixons Group. If they all run Freeserve, that's a powerful base for any ISP.'

David Clarke, chief executive of VirginNet, said he believed the ISP was safe from the Dixons threat and questioned the lack of Dixons branding.

'We believe it's vital that customers have a brand they know and trust.

Hence Virgin is happy to put its name on its product,' he said.

Nicholas Lansman, head of secretariat at the Internet Service Providers' Association (ISPA), said: 'One should look for the hidden catches on any deal that looks very cheap or even free. If the ISP service is being used to foist another service on consumers, they should be wary. Dixons has not signed up to our code of conduct.'

An Oftel representative said it would not be looking at the deal, despite its similarity to the BT one currently under investigation.

See page 14.