KEY POINTS:
Vodafone has really started to leverage its ownership of internet provider ihug by offering a broadband deal that promises to shave a sizeable amount off your monthly phone and internet spend.
While the deal is being dubbed "free broadband" - you get a 1 gigabyte account and connection without paying the entry-level $30 a month connection fee, there are a few things that make it not so free.
For starters, you have to sign up to ihug's phone line rental ($41 per month) and take up the company's Talk 2 ($20 per month) which allows for unlimited calling to landlines nationally.
The deal also has a 12 month term, so there's no guarantee that the deal will still be on offer late next year. There's also the cost of a DSL modem to consider ($100) for new customers - other ISPs offer free modems on sign-up. You have to sign up by October 31.
All that considered, the ihug deal ($61 a month for the 1GB account) may suit you well and is great news for existing customers. For instance, those on the company's $50 flat-rate, all you can eat broadband plan are likely to already have their home phone with ihug.
In that case, they are allowed to apply the $30 discount to their existing bundle of services, so for flat-rate broadband, flat-rate national calling to landlines and home phone rental, they would pay $81 a month.
Not a bad price for what's on offer and you'll already have the modem currently supporting your ihug DSL connection.
Likewise, Orcon's free phone line deal, which is available until the 17th of August to the first 5,000 customers is less free than subsidised.
That new deal, unveiled last week, offers a 20GB high-speed broadband account, unlimited calls to other landlines nationally and monthly phone line rental for a total of $80 per month.
As is the case of ihug, the requirement to take up the $20 a month calling plan subsidises the loss from the waived monthly broadband account fee. For those who make a lot of national phone calls, both deals will prove very attractive. For those who generally make local calls, both deals amount to a $10 a month discount for 12 months.
"After this time, Orcon reserves the right to charge the customer for the Homeline service," Orcon states in its terms and conditions, though it is giving away a free Dynalink modem to each new customer.
"At the end of the 12 month period you will be charged, and must pay, the applicable monthly broadband access charge for your broadband plan, unless you cancel your broadband service," writes ihug in its terms and conditions.
What is key to both these deals and will determine whether it is attractive to move from your current provider is the amount of phone calls you make and the current toll call pricing you receive.
What Orcon and ihug are offering are loss-leading products designed to win customers ahead of them putting their equipment in Telecom's phone exchanges under local loop unbundling.
But the rate at which phone exchanges will be unbundled will be relatively slow - 15 exchanges per quarter. The question is whether Orcon and ihug will make these 12 month deals permanent as they wait for unbundling to come online nationally. I really hope they do. It seems $80 is now the sweet spot for a bundle of phone and internet services and that's a reasonable price to pay for high-speed internet with a generous data cap and unlimted national calls.
Telecom and TelstraClear have yet to respond to the deals on offer from their smaller competitors, but will have to, in order to stop churn of their customer bases going through the roof.
Telecom seems to be trying a different tack - offering its Xtra customers a suite of free online tools, which may come in handy.
YahooXtra Bubble gives you a customizable homepage, 1GB of online storage for hosting documents and files, a Flickr Pro account worth US$25 and allowing unlimited photo uploads to the Flickr photo-sharing website.
Soon a copy of Norton Antivirus will also be added. That's not a bad deal, but will it compare favourably to a discount of cold, hard cash?
Slingshot chief executive Mark Callander is not impressed with the 'free' broadband package.
"I'm extremely concerned with the Vodafone offer and how misleading this is for consumers - the advertising and key messages are a clear breach of the Fair Trading Act," he said.
In an email to nzherald.co.nz, Callander listed several areas for concern.
- The advertising message and headline 'Get 12 months free broadband' does not sufficiently communicate the costs that consumers will actually incur to get the offer. New customers must purchase a modem that costs $99.
- For consumers to get 12 months free broadband they must also move their homeline at a $41 cost and in many instances this will be higher than what consumers are paying with Telecom. In addition they must spend a minimum of $20 on toll national toll calls to get the 12 months free broadband.
- The 12 months free broadband only applies to their entry level broadband plan and this has a very low data cap (1Gb). The average broadband user consumes significantly more than this each month and iHug does not offer customers the ability to avoid this type of bill shock.
- A 12 month contract term applies to all services and the termination fee is significant at $199 - this is a significant commitment.
"In my opinion the Commerce Commission needs to address this issue with urgency," he said.
"At the end of last year the Commerce Commission addressed many of these issues with key industry players and it is disappointing to see a dominant player within the industry abuse and ignore the rules. This behaviour is stifling competition and consumer choice."
Vodafone communications manager Paul Brislen responds:
"This deal works in a similar way to the 'buy two pairs of shoes and get the third pair free' offers. We're saying buy two services and we'll give you the monthly broadband component free. Customers buy a home phone connection from Vodafone ($41 a month) and a tolls package that offers an unlimited number of national calls ($20 a month) and we'll give them broadband for free (normally $30 a month). Broadband 1 offers maximum download speeds and 1GB of traffic.
"1GB is our entry level plan but it's enough to download around 6,000 photos, more than 300 songs or 200,000 text-based email - that's certainly enough for most customers who want to try out broadband but have been put off by the price.
"For users who want more, we also offer our higher level plans with the price of Broadband1 taken off as discount - so a 5GB plan will cost customers only $10 a month.
"The majority of existing ihug customers can take advantage of this deal without paying a transfer fee because they're not on a contract. Any customers that are on a contract because they've taken advantage of a special deal with us, can simply pay a transfer fee which will be between $99 and $199 (whatever the early disconnection fee is for their contract) - so they'll still be saving money.
"The 12 month contract simply means they stick around to get their 12 months of free broadband - so yes it's a commitment, a commitment to get their free broadband!"
What do you think of these new ihug and Orcon deals? Would they compel you to switch provider? Is $80 a month for phone and internet a reasonable amount to spend?
