One-fee ISP gives it another go

The firm that last year offered lifetime Net access for a flat fee,, is expanding despite seeking bankruptcy protection in December.

A Silicon Valley firm that gained notice last year when it offered lifetime Net access for a flat $59.95 fee is trying to expand despite seeking Chapter 11 bankruptcy protection in December.

The San Jose, California-based has faced constant challenges since launching last January, including technical glitches and a skeptical market. Although the company met its first subscriber goal of 23,000 customers in November, depends on advertising revenue--a plan that has been the demise of similar free all-you-can-eat Net access services.

And like many Net start-ups, has had a tough time making money while its debt ballooned. "On December 15, we filed Chapter 11 because the network didn't do what it was supposed to do, so we couldn't generate any revenue," Scott Smith, the company's president, said. "We don't expect to be in Chapter 11 long."

Under Chapter 11, a company continues to operate while it works out a debt repayment plan with creditors. listed liabilities at between $1 million to $10 million, according to its bankruptcy petition. The company, which did not list assets, stated that it is financed by private investors and has 16 to 49 creditors.

The key to's business plan is to harness more customers to guarantee eyeballs for advertisers. Whenever subscribers are logged on to the service, a separate rotating ad-banner window pops up. If users shut the window, their Net access will be cut off within two minutes.

After cutting off membership in November, the company said Friday that it is ready to take on 25,000 more customers in the San Francisco Bay Area. The expansion plans may not attract customers or advertisers, however. "New modems will be added throughout the weekend. We should send out about 2,000 [start-up kits] on Monday," Smith said.

According to, this ad-banner technology overtaxed its network for the past year. promised to never oversell its service, which meant it couldn't take on more subscribers until the technical problem was fixed.

"It took us ten months to rewrite our [ad-banner] software to work with the new network and ten months without any revenue is a lot for any company," Smith added.

The technical snafu sounds familiar. When it took 11 months to meet its first subscriber goal, the company blamed its slow start on phone companies. Executives said it took too long to get extra phone lines, which stifled its ability to add more servers and modems in order to take on more customers.

But the slew of setbacks it has faced, isn't stopping from trying to lure more customers. The company plans to launch service in Sacramento for as many as 10,000 customers next month. In April, the ISP says it will try to sign up 25,000 customers in Los Angeles. has lasted longer than most ad-supported ISPs. Last year Hyper Net USA canceled Cyberfreeway, which was promoted as all-you-can-eat access for a one-time fee of $29.95, and j3 Communications also ended its free, advertiser-supported service after only three months. In addition, hundreds of frustrated customers complained that they never received their lifetime Net access after paying between $25 and $45 to BOSnet Communications and an affiliated company, USFreeway, both of which have apparently disappeared.