Ihug will follow Xtra to a $24.95 monthly flat rate - but not until November, when the Southern Cross Cable comes online.
In the meantime, the company has further lower the bar on its high-speed product, Ultra - waiving the $149 set-up fee on the service for the next 1000 new customers. Ultra accounts start at $39.95 monthly for 30 hours.
New customers will also be offered a deal on Ihug's flat-rate Diamond account where they will pay only $39 for unlimited use right until the $24.95 rate is launched on November 1. Existing customers will either have to pay a further two months at the current $39.95 rate or take advantage of the Ultra offer.
ISPs such as Quicksilver and Wave Internet have moved to match Xtra's new rate in the past week, and Paradise.Net introduced a new $20 for 250 hours a month plan. But Ihug director Nick Wood says that until Southern Cross capacity is available, major shifts in pricing will hit service.
"You will find that Xtra's service will most likely suffer, as they like most, have no capacity until November," Wood said in a post to the ihug.general newsgroup yesterday "[That's] probably why they are offering money back if the service sucks. You cannot just shift a price point and expect no change to the network."
Wood said Xtra's price-cutting was driven by the ISP's marketing department, "with little consultation with the network guys". He said Telecom "has launched operation 'toast' - its aim is to delete competition in NZ. If they kill off every independent ISP , you will all be paying whatever they decide."
He said Ihug had been planning a November 1 price cut even before Xtra's August 10 announcement.
Wood said Ihug customers had been upgrading to Ultra "at a rate of two per minute" since the new offer was announced. He said that he understood that some Ihug customers would not want to wait until November for the new rate.
"You have 350 dedicated people working to give you the best service we can. Within the means we have. If that is not enough we appreciate your loyalty to us in the past and wish you the best with any new provider you move to."