Clear Net goes flat-rate, Xtra poised

The local Internet access model is on the move. Yesterday, Clear Net announced a flat-rate dial-up service, flat-rate pioneer Ihug doubled the online hours allowed under its $30 a month Sapphire plan and Xtra confirmed it was examining the flat-rate option.

The local Internet access model is on the move.

Yesterday, Clear Net announced a flat-rate dial-up service, flat-rate pioneer Ihug doubled the online hours allowed under its $30 a month Sapphire plan and Xtra confirmed it was examining the flat-rate option.

If the country's three large consumer ISPs are all to offer unlimited time online for a fixed monthly fee, there may be the first serious competition on price for more than two years. Whether or not there is an out-and-out price war, customers are certain to benefit.

Ihug made the first move yesterday, doubling the Sapphire account limit from 30 to 60 hours a month. Director Tim Wood says the change was not in anticipation of flat-rate competition from the other big players.

"If anything, we're looking at what some of the smaller ISPs, like Paradise, are doing," says Wood. "But we really just wanted to offer our customers a better deal. We want to encourage the customers on our $10 and $20 monthly accounts to move up, and obviously there'll be some people on flat-rate accounts who spend less than 60 hours a month who might want to move down."

Sapphire customers will still pay $1 an hour past the new 60-hour threshold. Wood says most users on Ihug's $45 flat-rate service spend more than 60 hours a month online and are unlikely to move down.

Later in the day, Clear Net was emphasising the $2 million investment in server hardware, modem pools, storage, its international access and new switching and cacheing technology that will back up its move to the higher volumes of a flat-rate regime. The company will announce the price of its new service on June 8, and launch it the same day.

Clear Net's Select plans have recently failed to match either Ihug's rates or Xtra's flattish Advance 50 plan, which offers 50 hours a month for $45.

Clear's ISP, which is known to have had some capacity problems, seems to have been biding its time in the hope of avoiding an America Online-style service crash on the introduction of its new model. Its infrastructure upgrade, which nearly matches its set-up IT cost of $3 million, began in February and will be completed by mid-year. Modem capacity is being tripled.

Xtra and Clear Net both built their customer bases by offering time-only accounts with no standing charge, but Ihug's model, based on a tiered system of fixed monthly rates – providing a more reliable cashflow – was endorsed recently when Sky Television took a 30% stake in the company for around $30 million, citing its good financial performance as a factor.

There has been some scepticism over Telecom CEO Rod Deane's suggestion last week that Xtra, with nearly 200,000 "active customers", would be worth about $2 billion if it were to be floated.

There have also been rumours recently that Xtra is making the necessary upgrades to offer a flat-rate service. Xtra spokesman Glen Sowry doesn't ruling out a flat-rate offering.

"We've been paying close attention to all the pricing plans – that's a regular occurrence," says Sowry. "We keep tabs on the market and among the options for us is a flat-rate plan – but whether that makes sense hasn't been determined as yet."

Even if Xtra has really been doing no more than weighing up a new model, its hand is likely to be forced by Clear Net's announcement.

Wood says he has no idea at what rate Clear Net or Xtra might pitch a flat-rate service, but says "obviously, we'll match them in whatever they do. That's not a problem.

"If they start going lower then everyone's going to start getting into a price war. That'll be good for the consumer, but there's not much room to move when it comes to flat-rate pricing, so I'd be surprised if it went too mad."

Clear's online services director, Deborah Menagh, says the new flat-rate plan "will not only give our customers a further access option which addresses the need for certainty in pricing, it will dispel forever the notion that flat-rate Internet access and quality service are incompatible."

Clear also announced its intention to join a number of other ISPs, including Ihug in an Internet exchange based at the Auckland Sky Tower.

Meanwhile, Ihug is re-establishing the retail presence it withdrew when it consolidated its helpdesk. A new office at 85 the Terrance in Wellington has been opened, and others are to follow in Christchurch, Tauranga and Napier. The sales offices will push Inug-branded PCs and telephone services as well as Internet access.

Ihug's call centre is also being moved away from its main Newton Road premises into a dedicated building, from which it will operate around the clock. Sounding a similar note on service as Menagh, Wood says the call centre is being upgraded to offer speedy access at any time.

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