The news hit the streets mid-day yesterday: Clear and Telecom agreed to
put many of their arguments behind them and get on with the job of getting on.
Only the most naive could believe that the timing of the announcement was
nothing but conincidental with today's release of the Ministerial Inquiry
It doesn't take X-ray vision to see through the way in which the two telcos
have agreed to join forces to the exclusion of smaller players -- particularly
in the area of broadband Internet access.
Here's the way I see it:
The rampant success of free ISP services such as ZFree, i4free and FreeNet
have reportedly hit Telecom's XTRA's revenues and planned growth quite hard --
partly because some users cancelled their dial-up accounts and partly because
it forced a significant drop in price for flat-rate.
High on Telecom's agenda was be the necessity to kill the interconnect
fees it was paying Clear for Internet calls. Without this arbitrage revenue
the free ISPs will shrivel and die -- or be forced to find other sources
of revenue to support their operations. This will naturally drive
Net users back to pay-for-use ISPs such as XTRA and help aleviate the hurt
in XTRA's wallet.
However, in order to gain such a massive concession from Clear, Telecom had
to offer them a rather attractive carrot -- and that came in the form of
exclusive wholesale access to the Jetstream copper-based broadband system --
albeit for a limited time. Telecom claim that they will be opening up
wholesale access to its JetStream product to other ISPs some time next year
so we'll wait and see.
They've also been quite careful to point out that Clear's wholesale access
to this broadband service is a "Beta test" -- effectively allowing Telecom
to delay opening up the service to other players (if they want) by claiming
that the testing has not yet been completed.
By doing this, the two big telcos have effectively locked out other providers
such as Telstra and IHUG. In effect a monopoly has become a duopoly. The
fact that Telecom is now sharing with its largest competitor also helps take
the heat off any criticism that is unfairly exploiting its monopoly in the
provision of such services through the local loop.
Clear was probably prepared to foregive the interconnect revenue on Net calls
because it realised that this could be something which they may have lost
anyway if push came to shove.
What does it mean to you and I
Well Clear are claiming that their ZFree no-charge ISP service will
continue, albeit with more emphasis on new revenue streams such as permission-based
direct marketing, e-commerce, etc. I dare say that ZFree will continue to
operate because Clear is now able to generate its Net revenues from JetStream
offset those costs in a way that only Telecom can match.
As for the other free ISPs -- well the future looks bleak I'm afraid.
As I've said before -- the ad-based free ISP business model won't fly. This country
isn't even big enough to support one free ISP let alone three or four. If
ZFree stays in business with the financial might of Clear and the balancing
revenues from its broadband operation then it will likely become the sole
remaining player in that market by a process of attrition.
If the other free ISPs withdraw from the market (or switch to pay-for-use)
then the performance and accessibility of ZFree is likely to become
intollerable for all but the most miserly or patient surfers.
So... enjoy these halcion days of free Internet -- while you can -- and
don't look for a proliferation of low-cost DSL services from multiple
players any time soon.
Remember that while Clear has been seen as the "good guy" in these recent
Telco wars, Clear's parent company -- British Telecom, is engaging in the
same sort of monopolistic practices that Telecom is accused of here. It's
not about winning friends, it's all about making money for shareholders --
but no public company can be criticised for that.
E-commerce should be so hard?
As I've mentioned here on several occasions, the government is holding
an e-commerce summit at the start of November in which it will be
enlightening our business community on how to take advantage of this
New Economy "rubbish" (Jim Anderton's word -- not mine).
One must question what kind of example they're setting for showcasing
how to accept online transactions when you look at the form which needs
to be filled out to register and pay for attendance.
Just take a look
and note the following:
- It comes complete with instructions on how to move from field to field and
exactly how to type in your responses. I guess that they're expecting first-time
computer users to be filling it out or is this just unnecessary clutter?
- It would appear to be so unreliable that you're advised to wait seven days and,
if you still haven't heard back, return and print out the form so that it can be
sent off by fax.
WHAT???? -- SEND A PRINTED COPY BY FAX??
How re-assuring that is to those who are contemplating the use of e-commerce
as a business tool?
Would Amazon.com get away with saying "If your book doesn't arrive in a
week or two just print out your order and fax it to us" I wonder?
And what's wrong with a simple automated acknowledgement email sent by the
system to immediately confirm that the transaction
has been received?
I could be rude and mischevious by saying something like "how is a summit
that can't even handle simple online transactions with a reasonable degree
of professionalism and reliability going to offer anything useful to
those who attend" -- but I must be objective and fair:
This form isn't the fault of the government's summit organisers -- it's
a third-party site called
which offers a range of conference support software and services. But who chose
them as the service provider and what were the selection criteria I wonder?
To be charitable -- maybe they're going to use this site at the summit as a
case study in how not to do e-commerce on the Net -- who knows? :-)
As always, your feedback is welcomed.