Absa`s intention to launch a service offering free Internet access to consumers has received a mixed reaction - some calling the initiative laudable, while others are questioning the viability of the project.
The service will not be restricted to Absa customers, and includes five free e-mail addresses and 10MB of Web server space - a similar offering to existing South African Internet service providers` services, but without the cost.
Previous attempts have been made to offer free Internet access to South African Internet users - with Xstream being sold up the river, while successor XSINet still remains unprofitable - a situation often attributed to Telkom`s pricing structure.
Angelo Roussos, joint-MD of Internet connectivity company Infoline, believes Absa`s free Internet service could be very successful if it is linked to a loyalty plan. "If they do it without that, it will flop," he says.
He adds that the advertising model to support free Internet - such as that used by XSINet - has "no chance of working in SA".
XSINet is currently breaking even, according to David Le Roux, the company`s MD, and expects to make a profit by mid-year. XSINet has started charging an administration fee for its service, which, according to Le Roux, was introduced to stop abuse of the free Internet access.
He says abuse of the system - using the free Internet access to send spam or hack into other systems - could be a serious obstacle for Absa. "We don`t see a revenue stream," notes Le Roux. "Who`s going to pay for all of this?" He adds that the 10MB free Internet space could also prove to be "very costly".
While Business Day questioned the viability of Absa`s plan, stating that the chances of success for the bank were "still unclear", other publications have been complimentary, with Business 2.0`s editor, Janet Paterson, stating that Absa`s move "is to be applauded".
Absa should also be wary of being too successful in the market - if it acquires 45% of the consumer Internet user market, it will be classed as a dominant player, and - under the Competition Act - will be unable to sell "goods and services below their marginal or average variable cost".
"If they become a dominant player it will be much more restrictive for them," comments lawyer with Thornton and Morris, Lisa Thornton, "but I doubt that would happen - at least in the short-term."
M-Web - which currently charges users for its service - is still making a significant loss. M-Web`s share price dropped following news of the Absa service.
"The people who should be really worried is M-Web," comments Le Roux. "Another slice of the cake is gone."
Absa has partnered with UK-based Affinity Holdings and IT vendor ICL to bring the free Internet access to market. The service will be officially launched on Thursday.
Consumers wishing to take advantage of Absa`s free Internet option will be able to obtain a CD from Absa branches, or download the software required from the Internet.
Absa hopes that the offer will help build the Absa.co.za brand, which will be the users` default start page.
An Absa spokesman was not available for comment at time of publication. Details of the offering and the bank`s overall Internet strategy are expected to be made public later this week.
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