Australia | Jul 05 2006
By Terry Hughes
The share price of Perth-based iiNet (IIN) is only just starting to recover from the savaging it took in late May, when the stock fell from over $1.70 to just 56.5c in the space of a few weeks, not to mention that fact that it was trading as high as $3.40 in September.
Since then, the stock has rallied somewhat and is currently trading at 70.5c, but the latest developments on the internet front don’t exactly bode well for the company.
Up until now it has been pretty much the only major player on the ADSL 2+ front, the latest form of broadband internet that allows for much higher connection speeds (30x quicker than most packages offered by other ISPs).
This extra bandwidth is particularly useful for offices with many users sharing the same connection as well as voice over IP (VOIP) users and those with addictions to downloading.
That lonely market position is set to change with the entrance of several other players into the ADSL 2+ market, including Optus (SGT), Internode, People Telecom, Exetel and Adelaide’s Adam Internet.
The most aggressive pricing, and the one that is most likely to have iiNet worried, is Optus with its DSL Direct plans.
Optus’ top end service costs $69.95 per month, and includes 60Gb per month of data, while iiNet’s includes 70Gb but costs $109.95. Without getting too geeky, the two services are much of a muchness, particularly when the off peak quotas are taken into consideration.
Of further concern for iiNet is that to qualify for the ADSL2+ speeds customers have to bundle in their line rental, otherwise they fall back to a traditional broadband service.
iiNet charges an additional $34.95 per month for line rental, as well as the cost of the calls made, whereas Optus with its Optus One which costs $59/month includes free line rental and $59 worth of calls.
The bottom line of this is, iiNet will likely have to cut its pricing, or face the risk of customers migrating to cheaper products, however, according to the company’s call centre new plans are currently being tabled.
The one saving grace for the company is the time it takes to roll-out the necessary technology to telephone exchanges across the country and the availability of competing services is currently fairly limited.
It took iiNet over two years to get to the position it is currently in, so at least it has some breathing room to change its pricing before its competitors present its customers with the ability to switch.