Telecom’s rivals prepare for a new market

Rivals are in a frantic spin trying to bump up their customer numbers

Telecom may have gone quiet on its plans ahead of Communications Minister David Cunliffe’s industry regulations coming into effect, but its smaller ISP rivals are in a frantic spin trying to bump up their customer numbers.

What’s more, they’re turning into mini-me Telecoms in the process, offering voice services over fixed lines at margins described as “razor thin”, thanks to regulated wholesale terms.

Just recently Orcon announced it was “thrilled” to have bought a Siemens IP-based voice switch for $2 million. The purchase means that the provider will become a full telco and carrier, says Scott Bartlett, Orcon’s general manager.

Bartlett told the New Zealand Herald that Orcon intends to sell packages that include broadband, video-services, IPTV and a phone line for $50-$60 a month. He went on to say that the packages would result in “a heavy loss-leader in the market” for the company, but the idea is to get as many customers as possible on-board before Telecom’s network is opened up to access-seekers.

Only a day after Orcon’s announcement, Slingshot, which is part of telco Callplus, joined the rush for new customers with a single bill home-line service, priced at $42.95 a month. That’s similar to Telecom’s own charge-rates, but Callplus CEO Martin Wylie points to the company’s flat-rate national and international calling packs — at $19.95 and $44.95, respectively — as attractive drawcards for the service.

Asked if a lower monthly home-line charge wouldn’t have made the service even more attractive, Wylie says the resold Telecom phone-line comes with only a 4% margin.

TelstraClear’s group manager of communications, Mathew Bolland, echoed Wylie’s sentiments regarding the tight margins for reselling Telecom’s phone lines. New Zealand’s second-largest telco launched its Big Back Yard plan after the launch of the Orcon and Callplus initiatives. The plan allows customers in areas covered by the Auckland, Wellington and Christchurch White Pages directories for 2006/2007 make free calls, essentially extending Telecom’s arbitrary local calling areas. However, customers must commit to a 12-month contract for their home-lines and toll calls to take advantage of Big Back Yard.

Complaining that Telecom has not kept its wholesalers informed as to price movements in the aftermath of the recent line-rental hikes, Bolland says there is no way TelstraClear can afford to keep its retail charges below the level charged by the incumbent.

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Tags ISPIPtelecomTelstraClearOrconcallplusslingshot

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