Short of a decision by the telecommunications companies to offer free local phone calls in the State, no other event promises to galvanise the growth of the Internet user market here as significantly as the arrival of free Internet subscriptions from Ocean, Gateway and, eventually, Dell.
And, for those in the industry, no other development so succinctly highlights the unresolved telecommunications issues which have remained on a slow boil for years. Because of these issues, for now, the companies offering free Internet services have little hope of recouping their operating costs, much less making a profit in the short term.
That's because they have only two ways of generating revenue: call charges or on-site advertising (somewhere in the future, offering a range of services will probably be a major source of income but the market does not exist yet for such features).
Income from advertising, although becoming more stable, is still unimpressive for most websites. Under current regulations, call charges will generate only a small amount of income for free Internet operators through interconnect charges - the amount operators pay each other whenever they need to route calls over each other's networks.
Similarly, traditional Internet service providers (ISPs) will have their already narrow margins threatened further by the free Internet operators while having few options for increasing revenue. In addition, later this month when the Telecommunications Regulator, Ms Etain Doyle, issues a report - and, it is widely expected, some significant changes - on the regulations governing these areas, the operating environment for ISPs will probably go topsy-turvy again.
If the introduction of free Internet services was inevitable - and most people working in Internet-related businesses believe it was, given its manic growth in Britain and spread into other European countries - it was still uncertain who would dare enter the profitless market first. "Frankly, it took a lot of balls to do this," says Mr Colm Grealy, co-founder of Internet service provider, Ireland On-Line. He has now left the company to pursue other Internet-related business.
The situation is quite different in the more liberalised telecommunications market in Britain. There, free Internet operators share revenues with the telecommunications company supplying the phone connections for the Internet service, which makes it viable, and even quite lucrative, for free Internet services to operate.
While ISPs here claim they have sought revenue-sharing arrangements for several years from Telecom Eireann, Telecom insists the regulatory environment prevents it from offering any such deals now. "Under competition law we cannot trade below cost. Currently, our interconnect rate is the lowest in Europe and if we were to enter into revenue-share agreements, we'd be trading below cost," says a Telecom spokeswoman. She says revenue sharing arrangements work in Britain because call charges are higher during the daytime and thus, "there's a bigger pool of revenue to share".
The special 1891-prefix number which gives Internet users lowercost charges for Internet access is not part of the interconnect scheme at all and thus, ISPs can't generate any income when they make the number available to their subscribers. ISPs actually pay Telecom to use the 1891 numbers because Telecom routes calls through its data network directly to the Net, which keeps pressure off the State's voice-call network. PostGem also operates a data network which its subsidiary, IOL, uses for its 1891 traffic. 1891 numbers allow users to connect to the Net for 1.54p a minute during peak daytime rates, as opposed to 3.83p for Telecom's regular daytime telephone rate.
Thus many ISPs were unhappy about introducing the number, although it benefits consumers. And Ocean says it and other telecommunication operators are unable to make use of the 1891 numbers because they aren't allowed to do so under current regulations.
That means that users of either Gateway.net or Oceanfree.net must use local-call connection numbers, which in the daytime makes it more than twice as expensive to go online. Thus, if a user goes online for more than 15 minutes during peak hours, it is actually cheaper to remain with a traditional ISP and pay subscription fees of an average of £120 per annum.
Ocean's business development manager, Mr Derek Kickham, says this shouldn't matter to most subscribers. "Eighty to 90 per cent of people use the Net off-peak and at weekends", when charges would be the same as an 1891 number. But that approach - which would be unlikely to broaden use of the Net - goes against the company's claim that it is also promoting e-commerce growth in Ireland.
Analysts in the US and Europe widely ascribe the health of the Internet market and the heavy use of the Net in the US to the fact that because there is no charge for local calls, people go online during daytime hours as a regular part of business or home life, rather than restricting the Net's use to hobbyist and leisure hours. Call structures in Europe which push people on to the Net as a sideline are considered the single biggest stranglehold on the Net's growth here.
But Mr Kickham says that's not an issue Ocean can address. "Certainly the way people are charged for daytime calls is an issue. But there's no option for us," he says.
More pointedly, there is certainly no incentive for any free Internet operators to offer 1891 numbers, since then they wouldn't get any interconnect revenue stream at all. Because all calls to Ocean's Net service terminate in Ocean's own network, Ocean receives a percentage of the revenue of each call - which sources say is nearly half the total cost of the call. Gateway, similarly, will get interconnect costs because it uses UUNet, the Internet division of MCI/WorldCom.
And, contrary to claims by operators, Telecom Eireann says there is no strict rule preventing other operators from using 1891 numbers if they request them. It is understood that Ocean inquired about the use of such numbers but wanted a different cost structure which would be more financially beneficial to it. A debate over the matter ensued and it is understood both Ocean and Telecom have asked the Telecommunications Regulator to clarify an operating structure under which competing operators can use 1891 numbers.
In addition, if the Regulator approves Telecom's request to offer "flat-rate" phone charges for Net access - 100 hours monthly for £20 - the free Internet services would come under pressure. Such low phone costs would make it cheaper for consumers to use traditional fee-based ISPs than a free Internet provider.
And to make the whole situation even more complex, the State is soon to deregulate the market for "local-loop" access - the phone lines which directly connect individual homes and businesses to the larger phone networks. At the moment, Telecom controls the local loop, but after deregulation, other operators will be able to offer their own deals for phone access, which will directly affect ISPs off all types.
Overall, regulations regarding telecommunications operations in the State are a grey area, allowing the various telecoms operators and ISPs to claim they can or cannot offer certain services that, almost without exception, would benefit consumers.
Free Internet operators will undoubtedly force change while increasing the ways in which operators compete in this small, narrow-revenue market.
That will make for interesting viewing over the coming year, when the Irish Internet market will have to make and remake itself several times over.
