Kaushik PauL, a 27-year-old business executive, was in for a rude shock when he logged on to his mail account at 123-india.com early in July. Other than the mails he had received from his girlfriend vacationing in New York, there was one from the service provider, ‘regretfully’ announcing the discontinuation of free e-mail services from the end of the month. It also mentioned that Paul would henceforth be charged a ‘premium membership’ fee of Rs 599 for six months, or Rs 999 a year.

"I had no problems in making a decision! I just switched to Yahoo!," says Paul.

This was the first instance of a free-e-mail provider in India shifting to the payment mode for its services. But it won’t be the last. The trend of mail providers changing their business model and charge fees has been around for some time in the US—Netaddress, the popular service provider of usa.net with a base of 4 million subscribers, started charging for its services in early-July. Subscribers were given 30-days’ notice to shift to the new paid services mode, with the fee being fixed at $29.99 a year for existing users and $41.99 dollars for fresh subscribers.

Dannette Lopez, a usa.net spokeswoman, admitted that in the current economic scenario, the company could not afford to continue offering free e-mail services. "Advertising dollars no longer work. We wanted to make sure that our customers at least had the option of retaining their IDs with us," she said. Other US-based players like Juno On-line and Netzero—both free ISPs—also changed their business models this year, imposing a limit on free hours. Even in India, Caltiger—one of the few free Internet service provides—announced that its free services were no longer a viable proposition in rural areas, adding that users would henceforth have to pay to utilize the services.

When ‘free’ was in vogue

It was Hotmail that spawned the era of free e-mail, with numerous others following suit. When Hotmail was bought out by Microsoft for a whopping $400 million in 1998, other than making its creator, Sabeer Bhatia, a very rich and suddenly-famous man, the deal also triggered a veritable rush amongst a host of others to tap into this ‘new hot Internet opportunity’. As new mail and free mail service providers entered the picture, so did the burgeoning number of the subscribers registered with them. The result—high valuations based solely on the number of subscribers. It was the beginning of the e-wave.

But come 2000 and the e-juggernaut screeched to a grinding halt. Dot-coms and other e-ventures with next to no revenues flowing in collapsed...the focus shifted from eyeballs to P2P—path to profitability. Yet, many e-mail providers seemed to have got out from under unscathed—it was the sheer subscriber numbers that kept their businesses afloat.

But as reality sunk in—that the size of a user base has little to do with revenue generation, advertisers started pulling out. And with the sole source of revenues drying up, e-mail service providers suddenly saw already wafer-thin margins dissipating. The ground reality of today, as put forth by Jasjit Sawhney, CEO of Net4India—"Only those who offer a wide services portfolio will be able to charge and yet have business longevity."

Will paid services be the future?

If Hotmail started the free e-mail trend, usa.net reversed it by beginning to charge a fee from July on. Others like 123india.com, however, have not gone the whole hog yet—the site offers a premium subscription-based service. The features are—24-hour customer support, more storage space and ad-free content. Says Sunjeev Swarup of 123india.com, "Our users have had a taste of our services. We are positive that most will agree to pay now." He expects many usa.net users to migrate to the services of 123 india.com as they were offering local payment facilities. Sify.com president (portals) Vivek Bali, however, feels that free e-mail is here to stay, ‘at least till paid mail does not offer a significant value upgrade’. The presence of other free mail providers also gives users other easy and still-free options, he adds.

The crux of this raging debate is that millions might be suddenly forced to pay for what they have always got free. If everyone has to payup, of course, there could be immediate favourable effect—an end to spam.

Amit Sarkar—Dataquest