In a letter sent to customers yesterday, j3 president Jack Feathers said that, as of noon PT tomorrow, the company was canceling its Internet service and its much-publicized free unlimited access plan. Customers who signed up between March 6 and March 19 were promised free Net access when they chose j3 as their long distance telephone carrier.
"It has become quite clear that the original offer for free unlimited Internet access with a $1 minimum long distance usage is not sustainable. For this price model to work, the customer base has to be quite large as margins are very thin on a per-customer basis," Feathers wrote. "Unfortunately, the customer base using long distance service has not grown in accordance with original estimates."
No one in j3's corporate office was available for comment, but the company's customer support center confirmed today that j3 is not selling Net access anymore. George Perkins, the center's technical support administrator, said Feathers sent the letter to customers yesterday.
"They are discontinuing Internet access," Perkins said today.
At first, j3's trendy offer seemed to be just another example of bundling Net access with long distance service, the kind of one-stop shopping for telecommunications products that has come as a byproduct of telephone deregulation. But j3's short plight shows that jumping into both the national ISP and long distance provider pools gives new meaning to the phrase, "sink or swim."
"The j3 guys were trying to compete head on with MCI and AT&T by providing 'universal' service. Small enterprises can't provide those services to consumers. AT&T and MCI have enough trouble handling customer service," said David Locke, an analyst for Volpe, Welty & Company.
"If you're going to give Net access away in order to compete in the long distance business, that seems like a hugely dead-end model," he added. "Everybody thinks this is easy, to be an ISP, and it is clearly turning out not to be."
j3 introduced the Net access service with its free, unlimited mileage in early March. The company said it would offer Net access at 28.8 kbps to 350 cities worldwide and had the capacity to handle up to 600,000 customers.
Soon after the launch, j3 said that, as of March 31, the "free" ride would not apply to new customers because the plan was not economical. Instead, new customers could sign up for a tiered pricing system, which charged from $9.95 to $19.95 per month for Net access.
Some j3 customers who took advantage of the freebie offer were worried that j3 would start charging them too. Yesterday, their fears came true.
j3 customer Raymond Rosborough, who is a deputy sheriff of San Francisco County, said that not only did his free Net access get canceled, but his long distance service was never activated. Now Rosborough is out $25.
"I signed up March 11, and about ten days after that I noticed that j3 had not switched my long distance over to its service. Since then, it has never responded to my calls," he said. "I don't know if I'm going to get my money back."
In Feathers's notice, he said customers would be reimbursed as follows:
"Your activation fee will be applied to your long distance bill. If your accumulated long distance bill through April 14, 1997, is less than $25, the difference will be credited to your credit card within 30 days. All customers who have accumulated a long distance bill through April 14, 1997, in excess of $25 will be credited up to $25 towards their long distance bill.
"If you don't change your long distance service, it will remain with j3," he added.
The company's Web site is still advertising "Internet access is completely unlimited--you pay nothing." But if visitors try to sign up, they are sent to a dead page.
That may be a metaphor for what analysts are saying about the entire concept of free or even unlimited Net access. For example, in December Netcom announced that it was dumping its $19.95 unlimited pricing plan for Internet access that it had pioneered, saying it couldn't make money at that price.
"The free Net access model is like having no model," said Patrick Kean, an analyst for Jupiter Communications. "If you're going to offer free Net access, you need to reach a critical mass almost immediately for a chance that the model could work. Now it seems like only big telcos will be able to offer even the low, competitive rates because they already have the infrastructure."