The uptake of DSL (Digital Subscriber Line) customers in New Zealand is so low that if the head of Internet service provider ICONZ Sean Weekes was in charge of it, he’d be looking to get out of the market entirely.
Telecom New Zealand Ltd. currently has around 56,000 customers using DSL products in New Zealand – double what it had a year ago. But Telecom has enabled enough exchanges that 83 per cent of New Zealanders can buy the service if they wished – that’s a potential market size of over three million.
Weekes says with such a low market penetration rate, albeit one that’s rising quickly off a low base, he would cut his losses.
“You’ve got to ask yourself whether it’s worth staying in such a market if there’s that little interest in it.”
Weekes says there are two main reasons for the low take-up rate of DSL services: lack of applications that demand broadband and the price gap between dial-up and broadband in New Zealand.
“If I were Telecom I’d be looking to drive the creation of services or applications that need broadband.”
Weekes points to Telstra in Australia which has just announced the creation of a broadband fund worth nearly $A5 million (US$2.9 million) designed to “support the development of new and innovative technologies that will encourage the uptake of broadband in Australia.”
Price-wise the jump from dial-up connectivity to broadband is just too great for many New Zealanders to bother with.
“Because we don’t pay per minute charges it makes the price of dial-up seem that much less than broadband. There’s no compelling reason to go to broadband at that price.”
Weekes would like to see the price lowered to encourage more users to take up the service.
Ihug CEO Martin Wylie says Telecom has to do something with its DSL operation or risk it being labelled a “dismal failure.”
“Telecom has failed to effectively promote and market this product and it’s such a significant change for most consumers that unless you have some innovative packages, pricing and bundling, it won’t ever take off.”
Wylie believes Telecom should approach broadband in the same way it took on the cellphone market in the early days.
“They had a very slow take-up of mobile until they went out and developed the Telecom service provider’s program and suddenly you had a bunch of people who had an incentive to go out and sell the service and it took off.”
Wylie says that would mean Telecom would become a genuine wholesaler of the DSL product instead of controlling every step of the way.
“It’s a great product, the time is right, the demand is there. A motivated retail force would make it work overnight.”
Wylie says Ihug would be one of the first to sign up for such a system.
Southern Cross Cables director Ross Pfeffer says the cable, which connects New Zealand with Australia and North America, is running at only about 20 to 30 per cent of capacity and he says a surge in residential users would be good for the business.
“Estimations on our network are growing steadily, which is encouraging.”
Pfeffer says there has been no sudden rush to broadband in either Australia or New Zealand.
“Internet traffic around the world is growing at a phenomenal rate.”
Pfeffer believes the Australian market is quite different to the New Zealand one.
“The Australian market has quite a range of suppliers of broadband products and different pricing regimes, different attitudes towards pricing additional megabytes of download.”
In the U.K., DSL provider NTL has been slammed by users of its unlimited broadband service for introducing traffic caps.
NTL has limited downloads to only 1GB per day on average for any month. Telecom, by way of contrast, allows only 600MB per month on its lowest full-rate JetStream plan or 5GB a month on its JetStream Starter package, which runs at only 128Kbps.