Industry divided over ISP flat-rate charging

With Clear Net poised to launch its flat-rate offering today, industry groups are divided on the effect widespread flat-rate Internet access charges will have on users, with some saying the prices may fall as low as $25 a month.

With Clear net poised to launch its flat-rate offering today, industry groups are divided on the effect widespread flat-rate Internet access charges will have on users, with some saying the prices may fall as low as $25 a month.

Jim Higgins, chairman of the Internet Society of New Zealand, sees the move as positive, while Information Technology Association president Peter Macaulay says the effect of more users online for longer will slow up both log on and response times. "The Internet's been developing into a utility resource and I think flat rates were inevitable - they'll probably fall to as low as $25, maybe $30 a month," says Higgins. "It'll make things difficult, initially, for some of the smaller ISPs in terms of calculating their hardware requirements if people are going to sign on and stay on. But it'll be great for customers - in fact, I just changed my personal account to flat rate 10 minutes ago."

Flat-rate access usually has limitations. Users of Ihug's "endless Internet" service get logged off after two or three hours, but the ISP's "three hour kick" only triggers when dial-in-capacity is more than 90% full. Xtra has said it will log people off after 12 hours, and reserved the right to force users who consistently get logged off away from flat rate and onto a limuited Advance plan.

"I think that's one way the ISPs can create points of difference, by guaranteeing you can stay logged on for a certain amount of time", says Higgins.

New Zealand ISPs began charging on a volume basis because "they really didn't know, until they had enough experience, how to convert volume to time. Once they did, they moved to time-based charges and have now moved to flat rate charges. It'll double or even treble the amount of surfing being done. And It'll sort out the sheep from the goats among the ISPs," he says.

Macaulay, however, doubts the number of users will increase "so the $40 charges will be very hard to maintain under intense use. To survive, the ISPs will have to lower their service levels. It'll be hard to log on, there'll be lower bandwidth available - I really don't think it'll be good for the user. So I think this is just a temporary situation - fixed fees aren't suitable for something as extensible as the Internet, and people will return to paying for time because they'll get better service."

If the large players do stick with flat rate, he says, small ISPs will be able to take advantage by offering cleaner log-ins and more bandwidth for faster access.

But access speed is really out of the hands of the smaller ISPs, says Higgins. "They're really relying on the telcos and cable companies to improve things. There are moves being made but not all of it's real."

Telecom's ADSL development is an example. It's "not really going to go anywhere because they won't be taking it round the country. I think fibre's the way to go - and they probably know it. The ADSL move is, I think, just possum skins on the fence, warning competitors that they're there in the high-speed market," says Higgins.

Telecommunication Users Association chairman Ernie Newman was not available for comment before deadline.

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