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Bluelight.com Asks Level 3 For More

Bluelight.com, the online arm of retail giant KMart Corp., gave Level 3 Communications the green light for more service Monday.

The contract agreement signals an increased confidence by KMart executives that it's online model does work and they are willing to put more money into a venture that's bringing in customers.

As part of Monday's agreement, Level 3 will provide complete back office support in 47 markets throughout the U.S., up from 24.

In effect, Bluelight.com is a virtual ISP in these areas, since Level 3 takes care of the Point of Presence (POP) solution and customer support, with Bluelight.com collecting the revenues.

Level 3 isn't the only dial-up provider for the free ISP. The company also has POP arrangements with AT&T, PSINet, StarNet and Telia Internet, to name a few.

According to Abagail Jacobs, Bluelight.com spokesperson, the agreement wasn't expanded to make up for the shaky status of PSINet, Inc., which has been under an increasing amount of financial scrutiny.

"This doesn't affect any of our other providers," said Jacobs. "The deal with Level 3 is just proof that we're always looking to make sure that our subscribers don't lose service and that we're providing the best coverage ever and giving them the best deal."

More than just a portal for online shoppers, bluelight.com has come under fire for its free Internet access, a free Internet service provider (ISP) model that hasn't shown a profit yet. In the past, many of these free ISPs tried to sign on customers and pay for the service with ad-supported revenues. The end result was vast capital burn rates and out-of-business signs.

Earlier this year, Bluelight.com tried to head off insolvency by setting up a tiered Internet access plan.

The program has been a huge success, Jacobs said.

"In looking at our ISP users, they have increased as shoppers by 56 percent," Jacobs said. "That's been great for us, because they're spending more on the site to get their free ISP service."

Many scoffed at the service, saying all a person need do for unlimited monthly access was to buy a $2 trinket on the site. Jacobs said that early on it was a concern for officials at Bluelight.com, but hasn't happened yet.

"In fact, our ISP users are our top 10 percent of best shoppers, meaning they're spending the most, too," Jacobs said. "They're not doing that, customers are really finding that in addition to the ISP service they're getting, they want to stop and shop at Bluelight.com."

Bluelight.com's tiered program began at a time when many in the high-tech community had already written off the free ISP model. The largest free ISPs, including 1stUp and Spinway (which was assimilated by Bluelight.com), had already gone out of business months ago.

"Even the number one free ISP in the nation, NetZero, Inc., was unable to stay free despite its smug assertion as the "Defender of the Free World," moving to a tiered Internet product in the early February, 2001. Juno Online Services, Inc., officials asked its free and premium users to volunteer for its virtual supercomputer program. If successful, the program could be the "price" of admission for free Internet access down the road."

Monday's agreement with Level 3 is proof that K Mart officials are confident its ISP customers will continue shopping online.

Originally scheduled to end at the end of May, Bluelight.com's success has prompted officials to continue with the program. Jacobs said the May 31 end date was put in its news release to satisfy the legal requirements of running a promotion.

"The plan was never to end the deal we provide customers," Jacobs said. "The reason there was an end date was because this is considered legally a promotion, since we were giving something away for free."