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BlueLight.com plans to issue a strong New Year's resolution: The online retailer and Internet service provider is likely to boot some of its 5.2 million subscribers off its free Internet access plan after the holidays.

BlueLight has offered free Internet access to its subscribers since January 1999 to draw customers to its shopping services. But soon, the company, whose majority owner is Kmart, may drop those who do not spend a minimum amount on merchandise, says company spokesperson Dave Karraker. BlueLight plans an extensive evaluation of its business model in January.

"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," Karraker says. "We have not laid down anything, but that is something we are going to be reviewing in January."

The 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 access for subscribers. Genuity on Tuesday sued BlueLight and its former ISP, Spinway, charging that the companies did not pay for services.

It's most likely that customers will have to spend a certain amount of money on BlueLight's site to keep their free access, confirms a source close to BlueLight who declines to be named. Karraker confirms this is a likely approach, but says nothing is yet final.

BlueLight's likely retreat from its untethered free-ISP model marks a continuing trend. AltaVista cut off its free service this week after its service provider, 1stUp, ran into financial troubles. Juno in June picked up customers of free ISP companies WorldSpy.com and Freewwweb.

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

Payment Controversy

Since then, BlueLight experienced a series of problems related to Spinway's assets and obligations.

Genuity claims it offered BlueLight a deal similar to its arrangement with Spinway. But BlueLight chose PSINet and WorldNet for dial-up services for BlueLight subscribers.

During negotiations, Genuity pulled the plug on BlueLight's dial-up services, causing four days of interruptions, according to BlueLight. This week, the company sued both Spinway and BlueLight, seeking $8.7 million for services. Karraker denies 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," says John Vincenzo, a Genuity spokesperson. Genuity continued services when BlueLight took over, he says. The lawsuit also charges that BlueLight engaged in deceptive acts and practices in order to induce Genuity into continuing its Internet access services.

BlueLight says PSINet and WorldNet simply offered less expensive services. "We got a really great deal with PSINet and WorldNet," Karraker says.

Regardless of the lawsuit's outcome, BlueLight has some tough work ahead. Kmart invested $80 million in BlueLight in August to fund it well into 2001, but it might run out of money as early as the first quarter of 2001, according to the BlueLight source.

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

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