Ihug has responded swiftly to Xtra's new flat-rate plan by dropping its rate to match Xtra's $39.95 and promising added valued from bundled packages including digital TV access.
The announcement comes 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.
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 $40 early last year to cover the then-plummeting New Zealand dollar, explaining it had to pay for much of its bandwidth and services in US$. The kiwi has not come back to the parity with the US$ 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 onto 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 own discussion forums suggest that customers' charge towards the new flat rate has hit the ISP's performance, with one angry message citing slow connections, frequent disconnects and long ping times in recent days.
Ihug has also been copping some stick in its own newsgroups lately, with some StarNet customers taking the Sky Tower feed complaining that their service has slowed down to modem speeds in recent weeks – and others losing signal altogether. Still others report no degradation in service at all.
"I'm tired of trying to get help as I invariably get fobbed off and told that the matter is being sorted out its not my end and they'll call me," said one customer in a newsgroup posting.
One customer claims to have been told that Ihug's Sky Tower antenna was moved recently to achieve a wider coverage area, but the company insists there has been no change.
Ihug company last week also doubled the monthly limit under its $30 Sapphire account to 60 hours and cut its registration fee by $20 to $39.95.
"Ihug also intends to focus its efforts in providing better access and pricing to its high speed service around the country, with more announcements to come," says Tim Wood.
"Ihug will also be looking to value add its new pricing with a variety of bundled packages, including digital TV access. Innovation is more than simply dropping prices it's about offering the customer usable and enjoyable new products. Ihug prides itself on its commitment to R&D."