The government's Project Probe broadband initiative is great news for the rural sector, says Ihug chief executive Martin Wylie, but the government shouldn't forget about middle New Zealand.
"It's great that the farms and the rural folk are being thought about but there's still a huge gap in the middle where service is too costly."
Wylie says the New Zealand market is perhaps the most price sensitive in the world and that's reflected by the slow rate of take-up for broadband services in the residential market.
"Look at Australia where the price difference [between dial-up and broadband] is less pronounced. If you're buying two lines, one for voice and one for dial-up, plus paying per minute charges, you're not far off the price of a broadband connection."
The New Zealand market is quite different, he says.
"Here you've got no local call charges, just the monthly rental, and the leap to broadband is much greater. People aren't willing to take it."
Wylie believes that broadband's greatest asset is not its speed but its ability to control costs - something that Telecom has shattered with its DSL product JetStream.
"Users can't be sure of the bill from month to month and that's ruining the market."
Ihug resells JetStream in New Zealand, as well as its own broadband offering, Ultra, which is a wireless service, however it has more luck in the Australian market than at home.
"Telstra is complaining that it can't service the outback easily -- well we've got a solution for it right there."
Telstra's approach to resellers in the DSL market is different from Telecom's as well, says Wylie.
"The wholesale rate is such that resellers can add value, can make some money and grow the market for everyone. Everyone's happy - the users, the resellers and Telstra."
However Wylie says in New Zealand the situation is quite different.
"Here we can't make a buck selling JetStream. None of the ISPs can. It doesn't matter how much extra service you're offering, if the price is too high no-one's going to take it up."
Wylie says Ihug would jump into the DSL market "boots and all" if it thought there was money to be made, but as there isn't there's no incentive for ISPs to sell it.
Telecom pricing for JetStream services is based on traffic usage - full JetStream users buy so many megabytes of traffic per month and pay extra on top of that price if they exceed their allowance. Telecom receives the additional revenue from that arrangement.
The basic entry-level product JetStream Starter, however, is billed differently. ISPs by bandwidth from Telecom for JetStream Starter customers - however since JetStream Starter was originally a price-capped services, meaning users would receive a set bill for any amount of traffic, the ISPs ended up paying the difference.
Most ISPs have now introduced bandwidth caps of between 5GB a month and 10GB, however Actrix has recently announced it would not cap service, but increase the service price for all JetStream Starter customers from $64.90 per month to $149.95 per month, more than double its original price.
Wylie says such prices seem to be designed to maintain Telecom's hold on the market instead of encouraging the market to grow. He would like to see ISPs and users charged less which he believes would increase the overall market dramatically.
Telecom was unable to respond to Wylie's comments by IDGNet's deadline.