ISP focus diverges as market gains maturity

Segmentation, the sign of a maturing market, is starting to occur in the ISP industry. Several companies, including Wellington-based NetLink, are attempting to better target the corporate market. The ISP has re-engineered its network during the past 12 months in order to target business customers. NetLink product development manager Don Guthrie says the ISP has upgraded hardware, software and communications links.

Segmentation, the sign of a maturing market, is starting to occur in the ISP (Internet Service Provider) industry.

Several companies, including Wellington-based NetLink, are attempting to better target the corporate market. The ISP has re-engineered its network during the past 12 months in order to target business customers. NetLink product development manager Don Guthrie says the ISP has upgraded hardware, software and communications links.

“There are two distinct markets emerging and we’re repositioning ourselves to deliver to the business market. The requirements of the home user are speed and price while businesses want fast and reliable.” Guthrie says NetLink’s user base is mostly corporate already and he says it will be phasing out dial-in customers.

Meanwhile, The Internet Group is segmenting its business and private customers for the first time. Managing director Nick Wood says The Internet Group is clearly defining service levels and product ranges due to increased demand from the corporate world for differential services.

“There was no need to in the past because you could count the number of leased-line customers on less than one hand. You’d tell them how much it cost and they’d say ‘No thanks, give us a modem connection’. But times, they are a-changing, I guess.”

He says product costs are coming down and requirements for speed are going up. The Internet Group is hiring about 40 people for the corporate customer side of the business.

The launch of a new product line is scheduled and the brand for the new business products is called VIPNet. There is a whole line of leased-line products based around the high-speed StarNet satellite solution.

Business customers will have account managers who can offer a range of products and keep them up to date with new technology.

Voyager national sales manager Brent Smith says while the residential market is “very important”, the business market is going ahead in leaps and bounds.

“The business market is very literate and knowledgeable and gives us the opportunity to offer services and products.”

Smith sees three segments within the business market — businesses wanting a high-speed Internet connection for their local area network, companies wanting secure remote access between branches, and companies wanting to do business-to-business connectivity or electronic data interchange.”

Auckland-based ISP businessman David Gottschalk has set up two companies, each catering to different markets. However, he disputes the labels of business and residential.

“The two main segments are those wanting service and those wanting access,” he says.

Gottschalk’s company, Web-Internet, caters to customers wanting a high level of service, while his Professional-Internet company is aimed at those wanting no-frills Internet connections.

“Ideally an ISP wants to have a mixture of both in order to make the best use of resources. Home users use the Internet mainly at night, corporate customers during the day, so they complement each other.”

The Internet Company of New Zealand (ICONZ) general manager Hugh McKellar is cautious about ISPs specialising in just the business or consumer market.

He says the growth of e-commerce could be a driver for some ISPs deciding to specialise. ICONZ recently put in an e-commerce server which allows online credit card debit and verification, a first step in the development of online shopping.

However, he questions whether the market in New Zealand is large enough for ISPs to completely limit themselves to one segment, although he believes it is sensible to develop areas of expertise.

He says there is already some specialisation, usually within one ISP, as business and private users’ needs are quite different in terms of speed of connection, email services and Web site hosting.

World-Net managing director Thomas Lee also questions the size of the business market in New Zealand and will continue to cater to all comers.

World-Net’s customer mix is 25% business and 75% residential.

“Home users have only one concern — the cheaper the better. Some ISPs have separate operations for business and home users but I don’t think you need to separate it.”

Clear’s Emerging Business strategic business development manager, Wayne Nicholas, says the differentiation between residential and corporate markets is starting to diminish because it often doesn’t matter where you work from.

Residential customers may start using Clear’s commercial Internet services as they begin working in “the new economy” where the lines are blurred between home and work.

He believes some ISPs will become commerce service providers (providing services to the corporate market to help them work better with their suppliers and business partners), and then migrate to being application service providers and finally full service providers.

“That migration is starting to occur certainly offshore, and I think it’s a logical progression for a number of organisations in New Zealand.”

He says in the past 12 months there has been some shake-out — particularly in the regional centres where the corporate market has decided it needs to align itself with more national operators.

Telecom Media communications mana-ger Glenn Sowry says Xtra has more consumer customers than business customers but the latter sector is the fastest growing market, although the consumer market continues to grow.

Xtra is always providing new products to meet demand from business customers and is also introducing a new brand called Xtra Business.

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