Web development and Internet services company Meridian Internet Technology has undercut both Xtra and Ihug with its flat-rate fee announcement of $35 a month.
So far Meridian sets the benchmark, with marketing manager Todd Brennan saying he is confident the new price point is sustainable because the bulk of its clients are corporate customers requiring Web site development and marketing services, as well as Internet access.
Brennan believes Internet charges will come down to align with US market rates - on average between $US17 to $US21 a month. Meridian, a private company which began operating in 1996, has recently upgraded its access modem pool and bandwidth capacity to allow for the projected growth that its flat rate offer will attract, says Brennan.
Meanwhile, two other ISPs have responded to Xtra's flat-rate fee of $39.95 a month.
Quik Internet revised its local pricing plan to match Xtra and to bring it in line with its parent company's overseas business units. The parent company, Quik International, is based in Nevada, and Quik (NZ), which is based in Auckland, is a franchised Internet service provider which, through a network of franchises, offers nationwide access, hosting and Web design services.
"It is a relief to be able to offer this pricing at last," says Geoff Olliff, sales and marketing manager for Quik. "It is the standard plan for our North and South American operations and offering time-based charging has kept us out of synch with these markets. Time-based charging has been holding consumer demand back due to fear of runaway costs."
Last week Ihug responded swiftly to Xtra's flat-rate plan by dropping its rate to match Xtra's and promising added value from bundled packages, including digital TV access.
The announcement came only days after Ihug director Tim Wood suggested his company might wait until Clear Net announces its flat-rate price on June 8 to consider any price cut.
However, Ihug's 12% price drop may not hurt quite as much as it seems. The company raised the price of its monthly flat-rate Diamond account from an original $40 early last year to cover the then-plummeting New Zealand dollar, explaining it had to pay for much of its bandwidth and services in US dollars. The Kiwi has not come back to the parity with the US dollar it saw in 1997 but it has recovered somewhat from last year's trough.
What will bite harder for Ihug is the company's decision to bring rural customers who connect with Ihug's NZWide service via the Telecom IPNet dial-up network on to the flat rate on the same basis as other users. Such customers had their their monthly hours online capped last year, and it appears Ihug may even have to operate the service at a loss to match Xtra's pricing.
Meanwhile, complaints on Xtra's discussion forums suggest that customers' charge toward the flat rate has hit the Internet service provider's performance, with one angry message citing slow connections, frequent disconnects and long ping times recently.