New Ihug chief executive Martin Wylie is a little frustrated.
Rulings by the Telecommunications Commissioner on various wrangles between Telecom and TelstraClear have yet to filter down to the rest of the industry and Wylie warns Ihug may be forced to seek a ruling or two itself.
Wylie, who has been head of the country’s third largest ISP for two months, says any deal reached between the two telco giants may not be suitable for the rest of the market.
“We’re ever hopeful that we can reach a deal that makes sense for us, but issues that are important to Telecom and TelstraClear may not necessarily be the same for Ihug.”
Wylie says while a large number of areas have been settled by the two telcos, not all of them have been addressed. That means there is no precedent for some of the things Ihug needs to deal with regarding its relationship with either company.
“Margins are thin in this business. It’s hard to make money in some of the areas.”
Wylie says Ihug will focus its intentions on home users, who make up around 90% of its market, and won’t be pushing out technological solutions just because it can.
“We’ve got some smart people here and they produce smart products, but we won’t be producing them for the sake of it. We’ll need to see some demand from customers before we go down that path.”
Wylie says that Ihug’s latest innovation, Text to Voice, would fall into that “gee whiz” category and admits that sales of it have been slow.
“We’re going to keep an eye out for that killer product that drags customers in, but in the meantime we’re going to focus on cross-selling our existing product range to our customers.”
To that end Ihug has spent around $1 million upgrading its network in New Zealand and about the same in the Australia market. Wylie hopes to improve robustness and service levels before introducing any new services.
“With voice products people have a higher expectation — that gets carried over into the internet business. I think service levels will converge at a much higher level than we currently see and that’s where Ihug will play. The entry level to this business isn’t very high because it’s not hard to offer a cut-throat service at the low level, but that’s not for us.”
Wylie says Ihug’s Australian business is in some ways easier to run that its New Zealand arm.
“Ultra [Ihug’s wireless broadband solution] is ideal for the rural Australian market. Telstra is complaining that it can’t service the outback easily — well we’ve got a solution for it right there.”
Ihug resells Telstra’s DSL solution in Australia and Wylie says he would resell Telecom’s DSL offering here in New Zealand more aggressively if the pricing were more appropriate.
“New Zealand’s probably the most price sensitive market in the world. Cost is the big driver and at the moment it doesn’t matter what services you add to JetStream, if the price is too high people won’t buy it.”
Wylie, a former Telecom high flyer who took over at Ihug from Nick Wood, says Telecom should realise that if it lowered the prices it would end up with a smaller slice of a much larger market.
“Their tactics seem to be those of a company deliberately restricting uptake rather than one actively seeking to increase the market size.”