Actrix tells tale of woe in face of Xtra pricing

ISP Actrix says unless it succeeds with a Commerce Commission pricing complaint against Telecom's Xtra, it's faced with going out of business.

Internet service provider Actrix was the first commercial provider in the business in New Zealand. If it doesn’t get a favourable decision from the Commerce Commission over complaints levelled at rival Telecom Xtra’s price cutting, it could be out of business this year.

“Telecom’s price is less than the cost of operating an ISP,” says managing director John Vorstermans. “They have said publicly that they will make a profit in 1999 if they are lucky.

“We’ve complained to the commission, but if it doesn’t run with the complaint there’s no market for an ISP. We won’t be in business in six months unless we can subsidise the Internet service from our other activities.”

Those activities include training--Actrix has a full-blown training room with 15 Pentium PCs--and some other services.

Vorstermans set up the business in 1989 as a part-time operation and began offering commercial services to technical people in November that year.

“There were just two of us at the beginning, probably making up one full-time job,” he says. “The business stayed part-time till two-and-a half-years ago when the Web took off. We’ve since grown to 10 people.”

He says the growing pains were “tremendous”, having to put in a business infrastructure, and there were many technical problems along the way. “It’s not dissimilar for Xtra. In some ways I can sympathise with them …”

Actrix began as a company with $3000 capital not paid up--and a lot of goodwill and support from the technical community, including Telecom.

Chartered accountant Peter Muller was commissioned last year to put together a business plan. He was then employed by Wrightson, handling the accounts for 19 branches.

Muller saw an opportunity and bought into Actrix--he is operations manager--which now has seven working shareholders and paid-up capital of $270,000.

Four part-timers and seven contractors have joined the team.

Vorstermans estimates the ISP has equipment that would cost upwards of $500,000 to replace.

“It costs on average $1000 to install and connect a modem, and we have 120 of those,” he says. “We’ve paid $80,000 for ISDN equipment and we have another $80,000 invested in servers.

“Bandwidth costs us $20,000 a month.”

On top of this investment to run the Internet side of the business is office equipment, PCs for the helpdesk and the Pentiums for the training room.

“We were growing at 50% a month before Xtra slashed its rates. Our growth rate is now zero, though we’ve got a very high renewal rate with customers,” he says.

The average Actrix customer spends between $20 and $30 a month, with heavy users spending up to $300 a month. The company has just introduced a flat rate of $60 a month for 60 hours access to try to retain business.

There are around 40 ISPs in New Zealand. After Xtra and Voyager, the next biggest is IHUG, probably followed by ICONZ and Actrix.

Actrix buys its bandwidth from Clear and is looking at moving all its telephony to Clear in protest at Xtra’s price cutting. “Most of the ISP’s are considering doing that,” says Vorstermans.

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