Ihug expects currency surcharge to remain until mid-year

The Internet Group (Ihug) is expecting the surcharge it has imposed to counter the effect of the falling New Zealand dollar to stay in place until around the middle of the year. Director Nick Wood says the company decided last month to introduce the surcharge, after carrying the depreciating dollar for several months. Unlike most independent ISPs, Ihug buys most of its IP bandwidth directly, in US dollars. 'It had reached the point where it amounted a $100,000 a month increase in our capacity costs,' says Wood. 'That's about $2 a customer, which is where we've set the surcharge.'

The Internet Group (Ihug) is expecting the surcharge it has imposed to counter the effect of the falling New Zealand dollar to stay in place until around the middle of the year.

Ihug director Nick Wood says the company decided last month to introduce the surcharge, after carrying the depreciating dollar for several months. Unlike most independent ISPs, Ihug buys most of its IP bandwidth directly, in US dollars.

"It had reached the point where it amounted a $100,000 a month increase in our capacity costs," says Wood. "That's about $2 a customer, which is where we've set the surcharge. We decided to call it a surcharge rather than a price rise - that might have upset people."

The surcharge, which ranges from an extra dollar a month on Ihug's Bronze and Gold accounts to $2 on the flat-rate Diamond account, will be payable from next month onwards. It has also been imposed on the company's Australian services.

The surcharge will be removed if and when when the Kiwi hits $US0.64. Wood says "everyone's expecting [the New Zealand dollar] to recover" and he expects it to do so by mid-year. "Apart from anything else,the US dollar has been trading very hard, and that can't last forever."

The only other local Internet services affected to the same degree as Ihug are those run by Telecom and Clear, which onsell capacity to both consumers and other ISPs in New Zealand dollars. But a Telecom spokesman says there are no plans for price rises, and Clear is also expected to carry the loss.

The currency slide also affects hardware for Ihug's StarNet service, but the problem there is less severe, as the first batch of 1000 expansion cards and satellite dishes were paid for when the dollar was stronger, and the source cost of new cards is set to fall.

Wood says Ihug is also working with a finance company on a scheme to absorb the hardware costs of StarNet - currently about $1000 - into a monthly service charge, so customers are not faced with a large initial investment.

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