BlueLight may cut some users off free access

BlueLight.com plans to issue a strong New Year's resolution in the near future. The online retailer and ISP looks likely to boot some of its 5.2 million subscribers off its free Internet access plan some time after the holidays.

BlueLight has offered free Internet access to its subscribers since January 1999 in an effort to attract users to its shopping services. Now, however, the company - majority-owned by Kmart - may cut off those users who do not spend a certain amount of money on merchandise, company spokesman Dave Karraker said Friday. BlueLight will carry out an extensive evaluation of its business model in January in which company officials will decide the form of the new ISP offering.

"We are taking a look at what we plan to do," Karraker said. "We will always have some form of free access, but we don't want the small-business user who stays on all day, we don't want the porn surfer, and we don't want the gamer who stays on all the time. We have not laid down anything, but that is something we are going to be reviewing in January."

The coming changes in BlueLight's free-ISP policies come in the wake of other ISPs recently ending free services and amid a dispute between BlueLight and Genuity, which provided BlueLight with dial-up Internet access for its subscribers. Genuity Tuesday filed suit against BlueLight and its former ISP, Spinway, charging the companies received services without paying for them.

A source close to BlueLight, who declined to be named, said the most likely model for ISP services at the moment is one in which users would have to spend a certain amount of money buying merchandise on BlueLight's site in order to receive free access. Karraker confirmed this is a likely approach but added nothing has been finalized yet.

BlueLight's likely retreat from its untethered free-ISP model marks a continuing trend in the industry. AltaVista last week cut off its free Internet access service. AltaVista's service provider, 1stUp, ran into financial troubles, prompting AltaVista to shut its service down. Additionally, Juno Online Services agreed in June to pick up the users of free ISP companies WorldSpy.com and Freewwweb LLC. The two companies will refer users to Juno to help bolster its own free ISP plans.

Like AltaVista, BlueLight recently encountered problems with its service provider, Spinway Amid financial difficulties at Spinway, BlueLight last week agreed to acquire some of Spinway's Internet service assets.

Since that time, BlueLight has run into a series of problems related to Spinway's assets and obligations.

Genuity provided dial-up access to Spinway and according to Genuity, Spinway still owed money for its services.

In the days following the takeover of Spinway, Genuity claims it offered BlueLight a deal in line with the one it had with Spinway. BlueLight officials, however, decided to go with PSINet and WorldNet and Service Co. Ltd. for dial-up services that it in turn offers to BlueLight subscribers.

While the deals were still being negotiated, Genuity decided to pull the plug on BlueLight's dial-up services, causing interruptions in the service from Thursday, Dec. 7 through the weekend, according to BlueLight, but the revenge did not stop there.

Genuity this week filed a lawsuit in a Massachusetts court against Spinway and BlueLight, seeking $8.7 million for services received and accepted but not paid for. Karraker denied any knowledge of the lawsuit, which claims BlueLight is responsible for Spinway's outstanding debt.

"Despite the fact that Spinway was overdue on its payments, we had been working for weeks with them as they attempted to restructure their business," said John Vincenzo, a spokesman at Genuity. "When BlueLight took over some of their assets, we were looking to establish a long-term service. We then began providing service to BlueLight on an interim basis. There is still money outstanding."

The lawsuit also charges that BlueLight engaged in a number of deceptive acts and practices to induce Genuity into continuing its Internet access services. While in negotiations with BlueLight, Genuity provided an interim service as good faith until an agreement could be reached, Genuity officials say.

BlueLight claims PSINet and WorldNet simply offered to provide services that were less expensive than Genuity's. "We got a really great deal with PSINet and WorldNet - a lot cheaper than some others would have provided," Karraker said.

Spinway provided Internet access to the likes of Yahoo, Barnes & Noble, NBC Internet and about seven other high-profile vendors. Following the BlueLight takeover, the companies could sign up with BlueLight for the same service, pay a fee to redirect users through BlueLight's site or drop the service, Karraker said. All of the vendors except for NBCi agreed to roll their service over, he said.

Regardless of the outcome of the lawsuit, BlueLight has some tough work ahead of it in the near future. Kmart invested $80 million in BlueLight in August, but BlueLight has been running through this cash at a faster clip than previously expected, the BlueLight source said. The $80 million was meant to last well into 2001 but might run out as early as the first quarter of next year, according to the BlueLight source.

Karraker vehemently denied these allegations, saying BlueLight still has plenty of cash.

BlueLight, in San Francisco, is at www.bluelight.com/. Genuity, in Burlington, Mass, is at www.genuity.com/.