In the Republic last week, the Internet went where it had never gone before: free. Will that really make a difference? Well, it's a numbers game. Free Net services need plenty of converts - either converts from other Net services or converts who have never ventured online before.

Because operating costs are high and there's so little return on investment, free Net operators have little incentive to stay in business if they don't get the numbers. Subscription-based Internet service providers (ISPs) are having a tough enough time as it is to make a profit, which is why most of them have been acquired by bigger telecommunications companies which can place a protective financial arm around them.

Garnering a big list of users through a free Net offering, though, is useful for companies that can sustain some operating losses, like Ocean, Gateway or Dell. To begin with, a large body of users will at least provide some income through interconnect fees, the amount paid by one telecommunications company to route a call through the network built by another.

Because calls to the free Net services originate with a call to Telecom Eireann's system before terminating in Ocean's or Gateway's systems (or rather, MCI/WorldCom's, since they provide the connectivity for Gateway.net), Telecom will pay interconnect fees to the other companies. The amount is sorted out between the parties themselves, usually about 30 per cent of the total costs of the call to the consumer. In Ocean's case, sources say the amount is closer to 50 per cent.

Equipment costs and upgrades are high, as are overall operational costs. Subscription Internet service providers are squeezed even though they pull in the average of £120 per year per subscriber.

Mr Barry Flanagan, one of the co-founders of ISP Ireland On-Line, says he once sat down to figure out how much an Irish ISP could make annually from interconnect fees. Taking a provider with 30,000 subscribers, he calculated the take at about £1.5 million (€1.9 million) a year. That's not likely to make much of a dent in total operating costs for a free Net provider. Even if that amount is bumped up to 50 per cent. Even if you add in the free Net providers' intentions to charge £1 per minute for technical help.

So why bother? Well, it's good for raising the company profile; it can add millions to the value of a company (the Dixons scenario, in which the electronics retailer's value rocketed into potential billions following the success of its free Net arm, Freeserve).

More significantly, it establishes a potentially valuable audience of consumers for the online services which will surely be offered before long. That's what the freenet operators are really interested in - the direct electronic link to their very own consumer market.

Some analysts have disputed the assumption made by many of these operators that their subscribers will also be there as a ready and receptive market for services and e-commerce. For example, all subscribers won't necessarily link to the free Net service's home page and thus, won't see the offerings. But that is an argument that disregards the myriad ways by which products can and will be marketed in the future - through pop-up ads to the desktop, through that old standby, SPAM (mass unsolicited email advertisements), through making a free Net user list available, at a cost, to other marketers.

Expect to see traditional ISPs use privacy as a marketing point. As a report on the European ISP industry released last week by Cambridge telecommunications analyst Analysys makes clear, ISPs will be desperately fighting over Internet users and will be seeking ways to differentiate their offerings. For free Net providers, that could mean big cuts in their charges for technical help, or offering cheaper call access (at the moment, users must make local calls - over twice as expensive during peak hours- rather than use one of Telecom's low-cost 1891 Internet access numbers). Perhaps like some British free Net providers, they will offer free phone access at certain times of the week. The report paints a grim picture for ISPs in general, particularly the paid-subscriber service. Half of all ISPs will be gone in two years because of this churn in the market, it says.

While the various services scramble for subscribers - paid or not - the real winners are consumers, who will gain cheaper, faster, access to the Net. In the short term, I'd wager that the free Net providers will lure tens of thousands of Irish people into going online for the first time over the coming months.

However, the transformations that lie ahead for business, government and society will need careful thought. The future is arriving faster than you think - and certainly, faster than the Republic currently is prepared for.

Karlin Lillington is at klillington@irish-times.ie