Freeserve, the pioneer of the free ISP model in the UK, is to jump into the already saturated online auction market next month.

Freeserve is setting up its online auction business in asscoation with US company Auctions.com, which will own 20 per cent of the business. Auctions.com will provide the software engine and ongoing software development.

Freeserve's online auction service will let both consumers and businesses auction items online. In the classic online auction business plan it will charge a fee for listing items and receive a commission on sales transaction.

Freeserve's move will not come as a surprise to the market. In its prospectus at the time of its initial public offering earlier this year, the company said it would put an online auction service in place to up its revenue stream.

Freeserve, which claims to have a quarter of UK Internet users as members of its service, will face strong competition from online auction giant eBay as well as Yahoo, QXL and newly launched Aucland.

Freeserve was unavailable for comment.