It's David and Goliath all over again

Mark Rushworth

With the battle for broadband in full swing, Mark Rushworth is in his element.

That's because the young and aggressive chief executive of ihug, the country's number three broadband provider, has become the de facto leader of the charge against his former employer, Telecom. It's a mighty task but Rushworth is loving it.

"We want to be the consumer champion of broadband, so given a role like ihug, which is the challenger, I'm in my zone," he says. "It's the little guy taking on the big guy and the big doesn't always eat the little. It's the fast who eats the slow."

Only 35, Rushworth is perhaps a little young to be taking on a giant like Telecom. But with seven years in various roles at Telecom under his belt, he's certainly not green - and being the upstart has always been in his blood.

"After all that time at Telecom, as an incumbent, I don't think I ever fit into that model. One of my report cards there said I was a 'rough diamond'. I'm sure they meant 'diamond in the rough', where I was the diamond and Telecom was rough," he says.

Rushworth was brought in to head ihug in August by Australian parent iiNet to "ignite the brand". The ISP had grown somewhat complacent and was seeing more customers leaving than joining. Revenue for the year ended June 30 was also flat at $34 million, from adjusted revenue of $32 million a year earlier.

Rushworth's inside knowledge of Telecom, where he did stints as marketing manager of the calling, new media and consumer mobile divisions, must also have appealed to iiNet executives.

He says his knowledge of Telecom's revenue streams - and what it is afraid of losing through Government intervention - has helped ihug mount its challenge. He also has an understanding of how the company's legal department works, which has taught him to be careful about what he says.

Most importantly, he learned how ihug needs to position itself from a marketing standpoint.

"You don't try to compete [with Telecom's resources], because you can't. Ihug needs to stand for everything that Telecom isn't."

Since Rushworth's appointment, ihug has managed to reverse its customer churn, win the Telecommunications Users Association award for best ISP and become the largest wholesaler of Telecom's DSL broadband service.

His most recent previous position was general manager of consumer business for investment firm Aquiline Holdings, where he learned the fine art of operational financial management and making acquisitions.

But he welcomed the move to ihug because it allowed him to get back to his real passion: telecommunications. With a background in engineering and marketing, and an entrepreneurial drive, heading up the ISP as a challenger to his former employer was too appealing to pass up.

"If you're in the telco industry, you have worked for Telecom. But, at some point, you realise there are better options than Telecom. It took me eight years to realise that," he says.

But the job required the Wellington native to move to Auckland with wife Sally and two young sons, James and William. With a regulatory battle on his hands and his wife recently returning to work as a general practitioner, Rushworth says free time is at a premium these days.

Still, he tries to run three times a week: "It's where I come up with my best ideas."

Those ideas include ways to keep the pressure on Telecom, which is now facing unprecedented scrutiny from the media and regulators.

The Government is examining regulatory options on how to break Telecom's control of the broadband market. The company wholesales internet connections to other service providers, such as ihug, who sell them on to customers.

The ISPs have been making an increasing amount of noise during the past few months, saying that Telecom dictates prices and, therefore, their profit margins.

In July, ihug was instrumental in uniting much of that unrest into Ispanz, an association of 25 ISPs who are now urging the Government to take action against Telecom. Ispanz members elected ihug's manager of wholesale and regulatory affairs, David Diprose, as their president.

Ihug's has thus been the loudest voice in calling on the Government to allow ISPs access to Telecom's network in a process known as local loop unbundling.

The ISPs should be allowed to install their own equipment in Telecom's exchanges, Rushworth says, allowing them to set their own broadband prices and speeds. Only then will competition happen and uptake improve.

The situation is coming to a head - Prime Minister Helen Clark recently identified improving broadband uptake, and New Zealand's poor OECD ranking in the measure, as a key economic priority. The Government plans to conclude its review by the middle of the year.

Telecom cut its retail broadband prices the day before Clark made her comments - further proof the market does not work, Rushworth says.

"It's become apparent in the last couple of weeks that there is no competition in the telecommunications market. In our market, it's only the threat of regulation that has caused Telecom to drop its prices."

Ihug cut its prices in November, but the move prompted no reaction from Telecom, Rushworth says.

Telecom's only impetus for lowering prices, he adds, is when there is a loud call for unbundling.

But critics of the idea, such as Business New Zealand's Phil O'Reilly, have said unbundling would infringe on Telecom's property rights.

The ISPs are simply looking to make their money at somebody else's expense.

Rushworth counters by saying he's not looking for a free lunch.

A fair set-up, he says, will see ISPs pay Telecom a fee of about $12 a user per month, plus a monthly charge for renting space for their equipment in the company's exchanges.

That would allow ISPs to offer competitive services with enough room to build in proper profit margins, and would allow Telecom to earn revenue from the use of its lines.

But Rushworth agrees that unbundling alone isn't the golden goose.

"Once you've got local loop unbundling, the gates don't suddenly open and everything becomes glorious. It's a step in the right direction."

An unbundled market would require constant vigilance from the Commerce Commission and will likely lead to further scraps between Telecom and the ISPs.

While the debate continues, the ISPs are negotiating with Telecom for better wholesale terms. Rushworth says ihug has rejected Telecom's latest offer and is close to asking the commission to make a determination.

The question will be whether ihug goes it alone or whether it bands together with other big ISPs, Slingshot and Orcon, in seeking that ruling.

"We're fairly close to a decision," he says.

Profile - Mark Rushworth

* Born October 9, 1970.

* Attended Scots College in Wellington.

* Married to Sally and has two sons. 

* In 1992, graduated from Canterbury University with an honours degree in electrical engineering. Followed up with a masters in engineering management, also at Canterbury.

* First post-grad job was as a sales and marketing graduate at Osborne Computers, but soon got into Telecom as part of its graduate programme in 1994.

* Worked in technical engineering, but moved to marketing strategy under Bruce Parkes, now Telecom's manager of Government and regulatory affairs. In 1995, worked as a business analyst of corporate strategy and pricing, before moving up to senior product manager of consumer calling in 1998. Became marketing manager of the division in 1999.

* Spent five months in 2000 as head of interactive development for television company ONdigital in London, where he worked under Air New Zealand head Rob Fyfe.

* Business development manager for Eventures New Zealand from October 2000 to May 2001.

* Returned to Telecom in 2001 as marketing manager of new media and data. In 2002, became marketing manager of consumer mobile.

* In 2003, became general manager of Aquiline Holdings subsidiary Exim International. Moved up to general manager of consumer businesses of parent Aquiline in April 2004.

* In August 2005, began role as chief executive of ihug.