The price war is over, say NZ ISP managers

The ISP price war is over. So says Xtra's manager of strategy Peter Hutterli - and no-one on the Internet service provider panel at the Internet Expo Conference at Ellerslie this week demurred.

The ISP price war is over.

So says Xtra's manager of strategy Peter Hutterli, and no-one on the Internet service provider panel at the Internet Expo Conference at Ellerslie this week demurred.

The panel, comprising Hutterli, ClearNet's Rodney Prescott, Voyager's new general manager, David Mackie, and, as moderator Russell Brown joked, "the token Wellingtonian", NetLink's Stuart Wilson, were asked where they thought the market was heading and what their focus would be over the coming year.

The youthful and enthusiastic group, reflecting the industry as a whole, were united in the belief that the Internet market would soon divide up on the basis of differentiated services rather than on a simple cost basis. Though, of course, cost will be the key differentiator of service provision and quality.

Segmentation may follow the US model, says Mackie, which has divided into ISPs and IAPs (Internet access providers), the former offering specialised services, the latter offering basic provision. Prescott: "Early adopters want bells and whistles; others, like banks, want stability and integrity". Tunnelling technology, used in virtual private networking (VPN), would suit customers like banks. Hutterli sees a stratification into access types, such as 64Kbit/s modems, broadband service, ISDN and videoconferencing.

Several of the speakers believe ISPs and telcos should concentrate on "closing the gaps" in the global and national Internet links; and educating the market, Wilson saying "customers don't know what to ask for yet". They say acquiring customers, educating and supporting the market and continually updating the infrastructure is so expensive that it is difficult to achieve economies of scale as in other businesses.

So what will the ISPs focus on this year?

ClearNet, in the business about six months, wants to continue to offer "telco quality" Internet provision, Prescott citing the company's claimed 99.9% service uptime as an example of what he means. He, like all of the panel, sees basic Internet access becoming an ubiquitous commodity, with the various ISPs going for different "service sets". They could be sites for commercial promotion, electronic commerce or private networking. ClearNet would be focusing on segments of the market, "rather than broad delivery of service", developing from its existing customer base.

This contrasts with Xtra, Hutterli saying the company would continue to offer "a broad range of services", though he added later that no-one will be able to service all of the market. Xtra's particular focus this year will be on business products and at the higher end of the market, since the price-driven consumer end will continue to have any number of providers. Hutterli says the company is looking closely at how it can cut costs, how Xtra services can fit in with its parent's (Telecom) telco service, and how it can open up and take advantage of new opportunities. Hutterli sees three areas of development this year: improvements in the local loop, content publishing and e-commerce.

Mackie, though he had only been in the job (and the country) two weeks following John O'Hara's recent resignation, comfortably held his own. Claiming, like Hutterli, that two years in the job made him a relative veteran, Mackie expects that in the future "content will be king" and Internet use will become mainstream. He says Voyager will thus be focusing on "value-added content".

Wilson, whose claims that Netlink was the only ISP to achieve profitability, received a light-hearted barb from Brown about taxpayer-funded development through the company's early links with Victoria University. He believes that "the sooner the New Zealand Internet gets away from modems the better". NetLink's client base is mainly from the high-speed corporate and government market, and increasingly geographically spread customers. Wilson agrees that Internet connectivity is lessening in importance, and says the company will be focusing on Internet application development, VPNs and telephony. He sees NetLink's business splitting into two streams in future: access/connectivity "solutions" and product development and consultancy.

As a parting shot, Prescott says we should expect lots of alliances, "and not just cut and dried ones", in the Internet market. "Strange bedfellows" will emerge, he says, perhaps even such things as data over AC (electricity lines).

So, no punches thrown, a remarkable amount of agreement. Russell, you're getting soft.

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