Rory Cellan-Jones

Freeserve and ten years of boom and bust

  • Rory Cellan-Jones
  • 22 Sep 08, 10:50 GMT

In Bradford today the National Media Museum is holding a little party to celebrate the tenth birthday of an Internet Service Provider. Why is that interesting? Well this particular ISP can lay claim to have brought the web to the mass market in Britain. What's more, in its rapid rise to fame and then back to obscurity, you can read much of the history of boom, bust and technological change in Britain.

CablesIt was on 22 September 1998 that the high street electrical chain Dixons announced that it was launching a free internet provider called Freeserve. The existing players - Virgin, AOL, Compuserve and so on - scoffed at the idea that you could run an ISP without a subscription fee. But the people behind Freeserve reckoned they could build a profitable business if they could grab a share of the telephone charges.

Success has many fathers - but three people have substantial claims to have come up with the idea. Ajaz Ahmed, a PC World store manager in Leeds who lobbied his Dixons bosses for years to start an ISP, John Pluthero, a bright young Dixons executive who was put in charge of the project, and the Yorkshire-based entrepreneur Peter Wilkinson, whose Planet Online business was a partner in the project, and who scribbled on a paper napkin the sums which showed that Freeserve could make money from those dial-up charges.

Within six months, Freeserve had a million subscribers, and the other ISPs were scrambling to replicate its model. By the summer of 1999 it had become Britain's first dot com to float on the stock market. In the spring of 2000 it had two million subscribers - compared to BT's 400,000 - and it entered the FTSE 100. At that stage Freeserve was still making big losses but its value climbed to an extraordinary £9bn - more than its parent company Dixons. More even than the Bank of Scotland, which in the year before it joined Halifax to form HBOS, made a profit of more than a billion pounds.

The world appeared to have gone mad but Freeserve's executives and its stock market followers insisted that "a new paradigm" had been created, where "eyeballs" on your home page were a more important measure of success than profits in the bank. "Beg, steal or borrow - but get your hands on some of those dot com shares" seemed to be the message from the stock market analysts.

The year 2000 also brought even more frenzied competition between ISPs offering customers even more for even less. In March that year I took a call from a PR man explaining that Alta Vista was about to unveil a deal which promised unmetered internet access for an annual charge of just £20. I was sceptical but we covered the story on the BBC and it ended up on the front of the Sun, under the headline "Free Internet".

It never happened. Alta Vista's service - immediately copied by others including Freeserve - was never launched. The whole dot com bubble began to deflate. By December, Freeserve's shares which had reached £10, had fallen below the £1.50 issue price. Then Dixons sold the business to France Telecom for £1.25bn. In retrospect that looks a fantastic deal - because in 2008 what is left of Freeserve? The brand has now disappeared under the Orange banner, which, I notice, is plugging "free broadband" on its site.

And what of Freeserve's founders? Ajaz Ahmed still lives in Huddersfield where he grew up, and has started a number of internet businesses, including Browzar, which claims to allow users to surf the web without leaving traces of their activities. It's he who's organised today's party in Bradford. John Pluthero runs Cable and Wireless in the UK, where he has built a reputation as a frank-speaking boss who doesn't suffer fools gladly as he tries to invigorate a lumbering telecoms giant. And the equally blunt Peter Wilkinson - one of the very few to make serious money out of the dot com bubble - is still running technology businesses from his Yorkshire base.

What is amazing, looking back ten years, is how much has changed - and how little. Back in 1998, one million UK households had internet access, for which they paid around £10 a month for a 56k dial-up connection. Those households spent around £10m a year on online shopping. Now around 17 million homes have a broadband connection, often paying not much more than £10 for up to 8Mbps, and it's forecast that internet retailing will take revenues of £60bn this year.

But in the space of ten years we have also been through two bouts of speculative madness - the dot com boom followed by the credit and housing bubble. Each time, clever people in businesses and investment banks have told us that they have invented brilliant new products that can defy the old rules of financial gravity, from "free" internet providers to complex ways of repackaging mortgage debt. So next time someone comes along promising you a free lunch, remember that someone is going to end up paying the bill. And it could just be you.


  • Comment number 1.

    Was Virgin a big ISP player in 1998? I don't think so. If you'd said Demon, even BT, that would be another story...

  • Comment number 2.

    Virgin were certainly a significant ISP player back in the 90s - don't know of their size relative to Demon, but they were better known (outside of the techie community).

    The big thing about Freeserve is it drove a change in billing models - previously everyone was on either a pay monthly plus per minute dial up charge, or a leased line type connection (pay lots per month). Freeserve bought a straight pay-as-you-go model in - just like the PAYG mobiles. 10 years on we have gone round several other models and pretty much settled on a fixed per month fee all inclusive (or possibly with bandwidth charges additional).

    Freeserve also cause real problems for BT - the loophole that meant they payed a proportion of the phone charges to Freeserve dictated that those calls had to be carried by BT up to one of the termination points (for Freeserve that was Leeds or Croydon initially). BT could not cope with millions of calls each evening going to those few locations, and ended up having to do all sorts of work to handle those calls (mainly handing the calls over at other switching points in the UK - and having to pay out rather more to other telephony companies to take that traffic).

    It was an interesting time - looking back you can see why thats a chinese curse!

  • Comment number 3.

    I still use my account for my ISP and as my main email account, despite being able to change to .wanadoo and .orange over the years. I've always wondered how long that's going to keep going for. Maybe quite a while if somebody out there still cares about the name!

  • Comment number 4.

    Thanks, great article!

  • Comment number 5.

    As someone who was desperately lurching between one "failed promise" to another at this time (yes, RedHotAnt, I'm talking to you!), the fact that Freeserve came and did what I and may others like me had wanted for so long was nothing short of a miracle.

    Although I never used Freeserve for more than the odd bit of "tide me over" free access (their unmetered tariffs never included the ISDN I needed), I'm in no doubt that UK internet users owe them a debt of gratitude.

    It's difficult to recall exactly how recalcitrant and sluggish BT and many of the other large ISPs were at this time - if anyone thinks it's bad now then you have no idea.

    Once Freeserve had opened the gates it was bye-bye to £130/mo phone bills and fly-by-nights like RedHotAnt, and hello "proper" internet.

    Thanks Ajaz!

  • Comment number 6.


    BBC Blogging Engine In "Can't Display Pound Sign" shocker!


  • Comment number 7.

    Freeserve was a great ISP at the time, and though the change it bought about was likely inevitable, Broadband Britain owes a reasonable debt to the company for how it reshaped its billing system.
    And I still have an active email address. Even my somewhat embarrassing very early attempts at making a website as still live at their original addresses.

  • Comment number 8.

    I am still using the account i signed up for in 1998 having seen it go from PAYG to an all i can eat dial up and did that mark a change in my surfing habits or what? I have now been with them for Broadband for a few years and have to say I have had very little trouble over the years.

    The email address from day one is still live but as it gathers a shed load of spam is never used for anything useful.

  • Comment number 9.

    As an internet user for 2 years in 1996, using CompuServe, Freeserve was a complete breath of fresh air that helped the Internet boom we see today. Back then we had AOL and CompuServe charging for access to their own portal systems, on top of call fees. Creating pay-as-you-go access at the time meant that anyone with a phone line could go out and use, rather that signing up long expensive contracts for access.

    Of course FreeServe was only free with the idea of no contracts or subscription fees, you still had to pay for web access. I'm amazed how few people remember Scottish Widow's free e-mail system "Freemail" that was launched in early 1997, and allowed freephone access to e-mail for viewing advertising. It came too early to be a success and folded after around nine months, and it wasn't complete internet/web access, but it was certainly a revolutionary idea that began the seeds of discovering new models other than the subscription + calls system we used to suffer.


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