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Leading Chinese Internet portal 263.net began charging fees for its services last Thursday and announced that it would terminate its free e-mail service in the next two months, triggering turmoil among millions of its free e-mail service subscribers.

In a notice posted on its website, the company said its users now have to pay between 5 yuan (60 US cents) and 50 yuan (US$6) a month for a 15-megabyte e-mail box.

"Paid services will make the e-mail accounts more stable and efficient, but also require more investment," said Mao Tao, the marketing director of the company.

The fee-based services will improve services for users by providing junk mail filtering and virus protection, he said.

The Internet company is following in the footsteps of Sina.com and Netease.com, two leading Internet portals that started charging their users last year.

The move has triggered outrage and even angry protests among millions of its free e-mail subscribers. By the end of 2001, 263.net had 20 million e-mail accounts, 120,000 of which were paid accounts. The termination of the free service means these users either have to pay the monthly fee or switch to a new e-mail address.

"It is such a nuisance. I have used the mailbox for a year. Now I have to go through all the hassle and tell all of my friends that the 263 mailbox account will be dead now," said Liu Haijiang, a student at Peking University. "I definitely won't pay the money. Why should I give the money to such a company that I totally have no respect for?"

Tens of thousands of angry users bombarded the company, posting acrimonious remarks on the company's website and calling for users to boycott the move.

Many industry insiders said the move might be a risky step for 263.net since most Chinese Internet users are used to free e-mail services.

Internet analyst Fang Xingdong said that 263.net's move may affect the Internet industry for the worse.

"I don't think it is a wise decision at the moment when China's Internet industry is still in its infancy," said Fang, chairman of Chinalabs.com, one of China's leading Internet research companies.

"The industry still needs to attract more users through various kinds of free services. Free e-mail has been the main driving force behind the growth of the industry."

Lu De, president of 21CN.com, the first fee-charging e-mail service provider, also said the act may not be worthwhile and that netizens will view it as an irresponsible and unfair move.

"You can charge users fees, but you should also give them the option of free e-mail service," he said.

However, Huang Mingsheng, president of 263.net, defended the decision, saying that paid e-mail is a global trend and is necessary in order to accommodate users who want safer and upgraded services.

"In less than 24 hours from the launch of the service, more than 15,000 users had registered for our fee-based services," he said, adding that he was confident that more will join.

"In the end, we hope the number will grow to 1 million," he added.

But Internet analysts have cast serious doubts on his projection.

Nathan Midler, an Internet analyst at International Data Corp in Beijing, said 263.net's move is risky.

"There are lots of websites out there offering free e-mail accounts, and the decision will turn many 263.net users away," he said.

Duncan Clark, an Internet analyst from business consultancy firm BDA China in Beijing, said the decision to charge e-mail users reflects the poor state of online advertising market.

Chinese Internet firms are still licking the wounds inflicted by a cyber downturn in late 2000.

Capital sources are drying up, and Internet firms have yet to turn substantial profits.

To stay financially viable, Internet companies like Sina, 163, 263 and 21CN began charging Internet users for e-mail usage last year.

For example, 163.net, a mainland arm of Hong Kong-based Tom.com, began charging between 50 yuan and 120 yuan (US$6 to US$14.50) a year and promised advanced technology to guard against junk mail and viruses.

China had more than 30 million Internet users at the end of last year. Official statistics show that for every user, there are 2.2 e-mail accounts and 6.8 items of mail sent out every day.

Although Internet users in China on the whole are not used to paying to send and receive e-mail, customers like Chen Hong are not too put off by the idea.

Chen said she has used 263.net since 1997 and will now pay 50 yuan (US$6) because she thinks it is an affordable fee.

But Guan Jing, another 263.net e-mail user, said he would leave for a foreign website such as Yahoo.com or Hotmail.com. Both provide free e-mail accounts with a limited size.

Yahoo Inc announced last Thursday it will begin charging users of its e-mail service who access Yahoo mail from an outside e-mail system. It also will begin charging a fee to automatically forward Yahoo mail to other addresses. But its Chinese-language portal, Yahoo.com.cn has no plans to charge e-mail subscribers, according to media reports.

Guan said compared with international Internet gurus, domestic Chinese e-mail providers do not pay enough attention to customer service.

However, not everyone is following the fee-charging trend. Charles Zhang, chief executive officer Sohu.com, one of the largest Chinese Internet portals, said Sohu has no plans to start charging fees for its mail services.

"We hope the free services can keep the popularity of our website, which will lay a solid foundation for our e-commerce. This is a bigger revenue generator," he said.