NetZero to Start Charging For Internet Access

For the first time, ad-supported ISP NetZero Inc. — the self-proclaimed “Defenders of the Free World” — plans to charge patrons of its Internet access service, but only those users who exceed a threshold of 40 hours online in a single calendar month.

In an effort to reign in costs associated with what it calls “professional users,” NetZero Inc. Thursday introduced a new service plan dubbed “NetZero Professional.”

Until the announcement, the company has been working to make the most of its slowing revenue — the majority of which it accrues through banner sales on a floating window that stays open during a user’s Internet session. In September, the company rolled out a research unit to monetize further its user base by selling anonymous demographic, surfing and consumer profile information to companies. Apparently, the combination of advertising and research revenues hasn’t been enough to satisfy NetZero’s needs, prompting the company to begin charging some users.

NetZero isn’t alone in tweaking its business model in the face of difficulties. Competitor Freei Networks sold NetZero its assets back in November, after having troubles drove it into bankruptcy. Another ad-supported ISP, Spinway, recently sold key assets to and ceased operations. CMGI-funded corporation has also abandoned the ad-supported ISP business in recent weeks.

NetZero said its new policy will affect a small percentage of its user base, noting that in November 2000 only about 12 percent of NetZero members who used its free Internet access service surpassed the 40 hour mark. However, the company said that 12 percent of users accounted for more than 50 percent of its telecommunications costs in November.

“Our introduction of the NetZero Professional service is designed to help balance the load between the typical recreational consumer and the heavy user,” said Mark R. Goldston, chairman and chief executive officer of NetZero. “A very small group of NetZero members — who we have designated ‘professional users’ — account for an inordinately large percentage of our overall telecommunications costs. This new service plan is intended to enable us to continue to provide unlimited Internet access to these professional users without impacting our ability to provide the same high-quality, free Internet access to the other NetZero members who are online with us less than 40 hours per month.”

The new service plan only takes effect when a user exceeds 40 hours in a month. At that point, the user will have an option to pay $9.95 for unlimited usage for the remainder of the month. Only in months that they exceed the 40 hours per month threshold will users have to pay to continue accessing the Internet through NetZero. Users who opt not to pay the fee will not have their accounts terminated, but they will have to wait until the beginning of the next month before utilizing NetZero’s free Internet access again.

The new service plan will take effect in January 2001.

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