Shakedown means higher dial-up costs

By PETER GRIFFIN

The new owner of resurrected internet service provider Iconz expects internet access price rises and a continuing shakeout of the industry this year as smaller ISPs struggle to make their businesses pay.

Aucklander Michael Spencer's company, Internet Corporate Solutions, picked up 10,000 residential customers and 3000 business customers when it top-bid on the assets of failed ISP Asia Online, which went into liquidation in October.

That meant Iconz, originally one of the country's largest independent ISPs, joined Ezysurf, Esurf Wireless, Virtual ISP and Jafa in the Spencer stable of ISPs and boosted his business customer base by around 300 per cent to 4000.

Mr Spencer estimates his brand is now third in the business internet-access market, and he is committing 80 per cent of his focus to that customer base.

That reflects its relative value compared with his residential customer base, which now tops 17,000.

The consolidation that resulted in Asia Online and Voyager falling would continue this year, weeding out struggling ISPs that had customer bases of up to 5000.

"I would be very surprised if there was more than a dozen strong players in this market in 18 months," he said.

"I'm confident that 95 per cent of the existing ISPs aren't making any money.

"Eventually their shareholders will want an exit strategy."

But he said his brands, collectively, had been trading profitably since last month.

The surviving ISPs would ultimately charge more for residential dial-up access after a long period of comparatively cheap pricing.

"I think Xtra is still too cheap. If you compare it with AOL in the US, for example, with flat rate unlimited access, you should really be paying $40 a month for access," he said.

Broadband pricing, too, was likely to rise, he said, despite calls for Telecom to reduce the prices of its residential DSL (digital subscriber line) products to stimulate demand.

"There will be players who discount to grab market share, but that will settle down and you will see a general move upwards in pricing."

The greater focus on business customers meant Mr Spencer's companies would release business-focused offerings, including managed firewall products.

Next month the company will launch a remote security product which will allow home users and businesses to keep tabs on their property via motion-detecting web cams sending pictures over either a dial-up or broadband internet connection.

* The turmoil of last year in the local internet sector was mirrored across the Tasman.

A study released last week by the Australian Bureau of Statistics shows that 115 ISPs ceased trading in the year to September.

That leaves just over 600 ISPs nationally, supplying 4.3 million active subscribers, up 2 per cent in the period.

The six largest ISPs, including Ozemail and Telstra BigPond, provide services to 64 per cent of internet subscribers.

But despite the death of the free ISP model, which is nonexistent here apart from a limited-subscriber service run by Zfree, some 4 per cent of Australian home subscribers continue to enjoy free internet access.

New Zealand has more than 80 operational ISPs. But the top four account for more than 70 per cent of the dial-up market.

ICONZ