Between the lines: Change sweeps internet services

By RICHARD BRADDELL

This week, Telstra Saturn unveiled Chello, an internet portal that offers entertainment and content services at speeds 10 times faster than conventional dial-up modems.

Chello will be of no great moment for Aucklanders, since they will not be able to use it soon. Telstra Saturn has chosen Christchurch as the first city to have it outside its Wellington base.

But Chello's arrival does signal a structural change in the internet market. From here on, the battle for supremacy will be among those who can deliver huge amounts of bandwidth that can support close to television-quality multimedia.

So far the obvious contenders are Ihug and Sky, using satellite, the internet providers who tap into the capabilities offered by Telecom's DSL services, and now Telstra Saturn's cable network.

With the exception of Ihug, none of the major players - Telecom, Telstra Saturn and Clear - were pioneers of internet.

This point is made by Christina Enright in a research paper towards an MBA degree in which she concludes that the advantages of being well resourced and getting timing right have far outweighed any advantage of being a first mover in New Zealand's internet market, even though barriers to entry are low.

Voyager, once a leader, has lost ground given limited parental support. Early entrant Ihug's success in keeping its pole position without outside help owes much to its fortunate decision to buy satellite capacity early on.

Ms Enright's conclusion that resourcing makes the difference is hardly a surprise. Clearly, Telecom's internet offshoot Xtra was able to run at a loss far longer than its competitors because it had the support of a large parent. Also, as Ms Enright says, easier access to its parent's network helped in ensuring it had the jump technically on competitors.

The Telstra Saturn foray also goes to prove the rule that having a big, well-disposed parent goes a long way in the internet business.

The Telstra Saturn umbrella brings together two companies that Ms Enright would have regarded as niche players: residential-focused Paradise, which was not so long ago taken over by Saturn, and NetLink, a business-oriented company bought from Victoria University by Telstra.

Now add Chello, Europe's largest broadband internet provider, which itself is controlled by Telstra Saturn's American half-owner, UnitedGlobalCom.

Until months before their merger, neither Telstra nor Saturn was in the internet market at all. But with their heft combined, and the support of committed parents, Telstra Saturn is set to become a force.