ihug introduces home-phone challenge to Telecom [+audio]

ihug is positioning itself to take on Telecom in its home phone market.

The company plans to offer unlimited landline calls within New Zealand for flat rates starting from $15 a month.

Unlimited calls within New Zealand at any time would be $20 a month, and unlimited national calls plus five top overseas destinations would cost $40.

The public could sign up from next Monday, October 2.

Offering a home phone service meant customers "could leave Telecom for good," ihug chief executive Mark Rushworth said

"I guess who we will attract are those callers that are spending over $100 on their international calls and see the $40 each month as really attractive."

The company's move from internet service provider to telecommunications company follows the Government's decision in May to open up Telecom's fixed line network to rivals.

The Telecommunication Users Association expects phone users to abandon Telecom in droves but chief executive Ernie Newman believes there could be some troubled times ahead for competitors.

He said voice calls deals are moving more towards packages than individual rates and believes consumers are smart enough to work out whether it is worth their effort to switch phone providers.

"People have been captive to Telecom for many years and sometimes there's a bit of 'let's try somebody else.' But I think the discerning consumer will weigh the product up on its merits and I think this offer from ihug has got a lot going for it," he said.

Mr Newman says ihug's initiative is a welcome move within the industry and competition is always good for the customer.

Mr Rushworth also said broadband would eventually fall in price, and ISPs had to look at expanding their product range or go out of business.

The cost for renting the copper wire was the same whether Ihug was offering broadband alone or extra services, he said. Providing a voice and broadband package would increase Ihug's gross margins to 63 per cent.

ihug has about 8 per cent of the broadband market and Mr Rushworth expected all its services to be at that level within a year.

Telecom also announced new, faster broadband plans yesterday.

ihug was put up for sale by Australian parent iiNet in July and expects the process to be completed by the end of the year.

It recently turned down a $30 million bid from New Zealand ISP Orcon, and is understood to have rejected a $36 million bid from internet rival Compass Communications.

- NZPA, NEWSTALK ZB