mail.com moves mail forwarding to premium service, as our reader Jorge E. Gomez was told in his inbox: "Unfortunately we are no longer able to offer this service to you free of charge and on 12/01/2001 we made forwarding a premium pay service." Here's the detail on what's free and what's not.

One of the big trends we've seen during the past months is similar services switching from free to fee by waves. Once one does it (here, Bigfoot turned paying back in August), others follow in a matter of months if not weeks, often with similar pricing structures.

What remains to be seen is how many users turn into customers, and how many credible alternatives (try to) stick to free in a given service/content category. Even if some free competitors remain in a market and get much of the users fleeing from the players that moved to fees, they will only get more pressure from the economics of web services, as costs ripple to them. Serving costs (hardware, software, labor, bandwidth) are more or less the same for everyone, so unless you come with a different way to, say, manage online photos or web mail, you'll end up facing the same scissor effect, amplified by the massive demand coming from your new users.

One of the promises of P2P is to lower the cost burden on the server side, but until more people get a broadband connection, distributed models won't help much. When you're on dial up, you can hardly be a contributor in a system that spreads CPU/memory/bandwidth load to the edges of the network. So web services are stuck between a rock and a hard place.

On one hand, they face high variable costs that are difficult to contain, if only at the expense of quality of service and availability (see how the Superbowl traffic spike and its attached Akamai bill apparently sunk Adcritic). On the other hand, fleeting users feel like they already pay enough to get online, so it's unlikely they'll spend more than 20 or 30 dollars each month on top of their ISP bill.

All is not lost though for sites willing to roll out paying services. It seems that market leaders can often introduce them with the confidence that their competitors will gladly ape them. Of course it's not as easy to do if you don't have enough market share to start with, and some categories might suffer from deep-pocketed competitors willing to lose money for strategic reasons (think Hotmail). Moreover, in market segments where companies enjoy some kind of lock-in, such as auction sites that sellers choose based on where the buyers are, the market leader can defend its market share even against free alternatives, as eBay demonstrated.

Overall, market dynamics will spread costs in a more even way (from sites to users, and maybe ISPs or other billing intermediaries), while we wait for the local loop bandwidth that will let online services leverage costs already sunk by end-users (that is, our PCs and online access costs that we already paid for). As to the independent/not-for-profit web, its visitors will have to realize that someone has to foot the bill.

02/17/02 update: related rant by John Robb.