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I guess this comes as a somewhat disappointing surprise to Bob Smith, the CEO and former manager of Xtra -- since you'd think that anyone who could offer the ability to break free of Telecom's PSTN monopoly would be on a winner.

After all, for less than the price of a regular phone and broadband connection, Woosh is offering fast(ish) internet and voice connectivity without the need to enter a pact with the devil.

So why are investors effectively saying "thanks but no thanks" when given the chance to get in near the ground floor on this enterprise?

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Well the answer is probably multi-facetted but I'd say that Telecom's absolute monopoly over DSL broadband distribution is one of the key ones.

Since Telecom already has copper to virtually every dwelling and office in the country, the cost of providing its services is significantly lower than the cost of setting up a decent sized wireless network as Woosh is attempting to do.

Let's not also forget that Telecom probably has some pretty impressive margins built into its broadband and PSTN services -- after all, you don't regularly churn out an annual profit between $500m and $1bn each year without making sure there's plenty of meat in the sandwich -- right?

If Woosh (or anyone else) became a threat to Telecom, I have no doubt that they could drop their prices just enough to push that competition out of the market -- and savvy investors are well aware of this.

Of course the Commerce Commission is standing on the sidelines going "tsk, tsk, tsk" and muttering quietly about sanctions, regulation and making various other threats -- but Telecom knows they're a bit of a toothless tiger.

As I mentioned in a recent column, even the ruling that Telecom has to open up its DSL network to Telstra at full DSLAM rates has probably got the boys and girl in Telecom Towers rubbing their hands with glee. Now they can cripple 3rd-party VOIP by hiking latency and lay the blame on their main competitor!

The other reason investors seem to be valuing Woosh shares at a level lower than that set by current owners is the issue of technology.

Let's face it -- wireless is not without its problems and it's not hard to find Woosh users (or former Woosh users) who have tales of woe to tell. The problem is that for every "problematic" connection you must have a good number of trouble-free ones, or your profit goes right down the drain. Does Woosh have this ratio right? If not then its shares will be worth even less as time rolls on.

So does Woosh have a show or have Tindal, Smith and the rest blown their dosh?

Well (as usual) I'm skeptical that it'll ever turn a profit.

I can't help but get the feeling that Woosh is a "dot-com" boom-bust-type business that's just five years behind the rest.

Wireless has its uses -- but it's no match for fibre or copper-based connections when it comes to reliability, cost-effectiveness, or ultimate speed. While it is ideal for smaller low-overhead regional coverage (as provided by a number of other independent vendors), it's not going to be a national replacement for your PSTN line any time soon.

While there are always a few who will opt for "anything but Telecom", the vast majority of people want an "always available" service and not one that might disappear just when you need it most (ie: in the middle of a really bad storm when you need to call an ambulance because a tree's fallen on your mother).

Likewise, broadband users are now used to speeds of up to 2Mb/S so Woosh's paltry 256Kbps is rather pedestrian by comparison -- with no guarantees (only promises) that it'll ever go any faster.

Sorry but I won't be buying any Woosh shares.

I guess Bob Smith now knows what it's like being at the mercy of an industry giant rather than being a the helm of one. Quite a sobering experience I suspect.

What's your take? Will Woosh become a major player or simply fade into obscurity - unable to compete with the might of Telecom's size and monopoly? If it disappeared, what would be its failing: technology limitations?

Go have your say in The Aardvark Forums

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