That didn’t take long. It was only November when Charles Schwab launched its first in-house ETFs with commission-free online trading for the firm’s brokerage clients. We said at the time competitors would have to respond. Now Fidelity is doing it, in a big way.

Effective February 3, 2010, Fidelity Brokerage will offer its retail clients commission-free access to 25 iShares ETFs. They also reduced online equity commissions for other ETFs and stocks to $7.95, but the real story here is the iShares. This is a revolutionary change in the industry.

As cheap as commission are now, the thought of paying anything at all holds many investors back from buying ETFs. This is especially true for those who are accustomed to using no-transaction-fee mutual fund programs. Now that wall is crumbling, and may well collapse completely in the next few years.

Fidelity’s program is superior to Schwab’s in several ways. For one, the iShares brand name is well-known and proven – not the case for Schwab ETFs. Furthermore, the iShares funds available through Fidelity without commissions represent much greater variety than Schwab is offering. Fidelity includes several international and bond ETFs that currently have no equivalent at Schwab.

On the other hand, Fidelity is not offering any of the iShares country-specific international ETFs or any sector ETFs. We can hardly blame them, since this would create serious competition for many of Fidelity’s own mutual funds. It could also be a hint that the firm has bigger plans: an ETF share class for the Fidelity Select Portfolios is an obvious possibility, especially now that the actively-managed ETF trail has been blazed by others.

Another thing that isn’t clear is whether Fidelity will extend the commission-free iShares program to the 401K and other corporate retirement plans it administers. This has been an industry-wide challenge; investors often want more flexibility but various bureaucratic and legal restraints have kept ETFs out of most such plans. Fidelity may be planning an attack on that front, too.

This is a story that will keep unfolding. One thing is sure: ETF investing will never be the same again.