The Internet Group (Ihug) has finalised a two-year interconnection agreement with Telecom, and expects to begin providing national and international voice services to its customers in early March.
But as it gears up for the telephony launch, Ihug is also extricating itself from another Telecom service. Telecom IPNet has been the vehicle for Ihug's NZWide dial-up service, but the company spent the past month shifting about 80% of NZWide customers to six new local POPs sited as far south as Invercargill.
The customers remaining on NZWide, who had been on flat-rate deals even though IPNet charges hourly, will be limited to 100 hours per month with additional hours being charged at $1.10 per hour.
Some customers who have had their terms changed have been vocally uphappy with the moves, but Ihug director Nick Wood claims ditching IPNet "was a matter of cost and reliability - it forever fell over. And also we had limited control over it and things we were promised we'd be able to do with it we couldn't. We decided we had to leave it."
Meanwhile, the voice interconnect deal agreed with Telecom is, at two years, of relatively short duration. It appears that Telecom negotiated the agreement to end around the same time as a number of existing agreements with other companies - suggesting Telecom expects the territory to change somewhat in the next few years.
Ihug will be using IP telephony, a path Wood has rejected in the past, but he says the "the quality of it and the way it's delivered" has led to the decision.
"We don't plan on using it internationally because we still don't believe it's viable through the Internet, but Ascend have re-engineered the Max boxes we use to do it, and by keeping the links separate we can get the quality to be as good as normal telephony. And it's a lot cheaper than going a buying a $3 million exchange switch."
The company will be providing both national and international services, says Wood.
"Our primary objective is to supply voice services to our existing customers and any new ones we get. It's a cheaper, reliable tolls service - we expect it to be as reliable as Telecom at about half the price.
"Over time, we expect to provide more of the infrastructure ourselves. We'll be providing our own national and trans-Tasman capacity in the short term, and for the international stuff we'll probably buy some Southern Cross (cable) capacity and connect direct to the US in the long run."
The company's television service, which is set to include 30 channels of pay-per-view movies and nine or more TV channels, should launch about a month after the telephony services.
"It's significantly more competitive than what Sky's offering," says Wood. "It won't have quite as good content when it comes to sports and things like that, but it definitely has better movies and the same sort of other programming.
"We're aiming it specifically at StarNet customers, but it'll come out in three forms - a set-top box, which just does pure television, or a box with an Ethernet port which does Internet and television, or the Super System, which is our new PC."
It will initially be available in Auckland only, but Wood says a national service is being discussed with another party.
Although he won't comment, the party in question is thought to be TVNZ's transmission subsidiary, Broadcast Communications (BCL). With Sky holding off terrestrial transmission of its new digital service - preferring to broadcast direct-to-home using the Optus satellite on which it has taken long-term leases on three transponders - BCL may be keen to attract a taker for digital terrestrial transmission (DTT) services.
Ihug is also near to selecting an agency to handle its first major marketing campaign.
"We've never really done any advertising before, so this is our first stab at spending some serious money on marketing," says Wood. "It's mainly a branding process for Ihug, and perhaps the TV component and StarNet. Voice is being done by a lot of different people - we see it as a useful thing to have, but we're not building the business on it. Our primary focus is the overall convergence."