ISP Responses to Xtra

Below is a small selection of typical responses from ISPs (and others) to the business practice of Telecom's Xtra ISP. There have been countless press reports, newsgroup messages and articles condemming Telecom.

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From: sbwwgtn@ibm.net   (Steve Withers)
Newsgroups: nz.comp
Subject: Re: Telecom taking control of NZ Internet
Date: 3 Oct 1996 11:20:56 GMT
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In <844223196.521snx@ocean.southern.co.nz>, manfred@ocean.southern.co.nz 
(Manfred Marriott) writes:
>Recently, there has been a number of posts here and there about how 
>Telecom will undercut pricing for other ISP's, then when they have a 
>large share of the market, and control the 'resources' of the Internet,
>raise prices.
>
>I really find that hard to fathom.  Could someone please tell me what 
>these 'resources' are.  How would telecom take charge of them, bearing 
>in mind IBM and IHUG's experiences.

Well......the way this would happen is: 

XTRA undercuts everyone else on price and puts them all out of business. 

How could such a thing happen? Well.........

XTRA / Telecom try to give the impression they are separate, but they 
aren't - really. XTRA is marketed via Telecom 123, 126, mail-outs,
Netway....and others.

XTRA services can piggy back on Netway frame relay links. I have
heard of one company who installed frame relay and then had a
follow-up offer of Internet access via XTRA through the same link
for less than $50/month for additional CIR and less than $1/MB for
data. That is a 64K connection. 

Hard to compete with when your bandwidth supplier is also your biggest
competitor.................and the prices aren't transparent. 

Hard to compete with when they are losing an estimated $800,000 to
$1,000,000 a month as an 'investment". XTRA has a huge staff on high
wages.........with a huge capital and labour investment for months before
they went live, building content and so on. Telecom's pre-tax
profit was $1.1 Billion dollars.......22% compared to revenue. This is 
very high by world standards - particulalry in competitive markets. 
So losing $12M a year to ensure dominance in Internet market share would 
be a "so what" proposition. 

Chicken feed. 

XTRA also had 'the benefit of the doubt' on 0800 pricing and various 
contractual matters that would have had to have been signed in blood 
first, had it been any other company. It's easier when you're part of the 
Telecom 'family'. 

Stuff like that. 

In short - *anyone* who sells Internet access has to buy that Internet
access bandwidth from Telecom.......and Telecom pay less for it than 
anyone else. 

An example: Telecom is afraid to offer ISPs better dial data prices for 
regional/national access ("IP-Net") because it might bolster the case
against them currently before the Commerce Commission. 

Wierd argument. You would think that if XTRA really *was* separate, the 
rest of Telecom would be busting their gonads to make other ISPs 
competitive - and alive as customers. Instead, they are sitting on 
their hands. 

By contrast, when Clear went to $5 on weeknights, Telecom responded in 
one hour. They had originally intended to go in at $6.50. 
So they have given residential users better long distnace rates than their
business customers (ISPs) who spend millions with them each year - but
compete with XTRA. This would be an uncharitable view.........of course,
but one can see things this way without too much trouble.  

This is not a purely local thing. Telcos all over the world are moving to 
secure ownership of Internet access. The Internet is becoming an alternate 
phone system and their survival depends on controlling it. The telco in 
Poland moved to FREE internet acces over 6 months ago. Let's see any ISP 
compete with that.  In the US, AT&T went for US$19.95 flat rate per month 
- and a year for free for tolls customers.  Only the apalling service 
they delivered at the outset left room for many to breathe - and sell up 
befire it was too late.   

As most telcos are semi-monopolies, it is pretty easy for them to wipe 
out the startups who don't have much capital. That is why, in about 
18 months if present trends continue, Internet access in NZ will likely be 
via Telecom, Clear, Telstra, IBM and one or two other large, global 
companies. 

Whether this happens or not, depends largely upon the policies of 
whatever government eventuates on October 12th. If National wins, 
backed by ACT, I'd call it a virtual certainty that ISPs as we know them
in NZ today will shrivel and die. Living on thin margins, the swipe a 
a telco price wand could remove their breathing space almost 
overnight.   

By contrast, most other parties have made noises about reining Telecom
in.....though most have been vague on what that would actually mean. 

The most commonly talked about proposal is to split off the actual
infrastructure and make it a consortium of competitors - or an SOE
or some other independent entity. This has just been done in California.
The aim is to make all service providers (local calls, Intenret, tolls - 
whatever) equal competitors on a shared network rather than one of the 
competitors owning the network and the others trying to compete with it.  

Politically, poeple need to think about what they want and guide the 
policy makers. One way or the other. 

This isn't an anti-Telecom post, BTW.......I am simply trying to 
highlight the issues that relate to Manfred's question. If I have 
mis-represented or exaggerated anything, I hope someone will 
let me know. 

************************************************************
Steve Withers - Wellington, New Zealand
steve.withers@ibm.net / swithers@vnet.ibm.com
OS/2 V4.0 - It does what you tell it - with VoiceType!
************************************************************

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From: john@atlantis.actrix.gen.nz (John Vorstermans)
Newsgroups: nz.comp,nz.general
Subject: Xtra's Tony Reeves talks about Privacy and Security. :-)
Date: 4 Oct 1996 03:57:47 GMT
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Tony Reeves  wrote:

>> Roger Sheppard  wrote:
>> 
>> >What is wrong with Actrix..??
>> 
>> Strange sort of questioning coming from someone who has not had an
>> account with us for at least 3 years?
>> 
>Does Actrix regularly publish info on users accounts?

You certainly have some odd views on what is reality it would seem.
Perhaps you would like to explain what was actually published concerning 
any users account on Actrix that you imply above?  
The person I was replying to certainly has no account on Actrix.

Of course we take security a bit more serious over on this side of town
where at least not everyone in the world can see what users we do have.
Mind you I would expect any serious ISP or for that matter, any knowledge
network manager who has any remote understanding of security on the 
Internet to understand why this sort of security is needed.  :-)

Privacy certainly is an important issue and these days even more so 
especially when it comes to Internet Users.  I can asure you Tony that 
Actrix takes its users security quite seriously.

However puting behind us the disagreements that all the other ISPs have
with Telecom and there Xtra Service, perhaps I can express my, and many
other ISPs willingness to site down with Xtra and try and work together
rather than get into these "there is nothing wrong with our service" or
"why is everyone bashing Telecom" battles and try and help resolve some
of the problems.

The Internet has always had a folklore of co-operation and helpfulness 
which in NZ seems to be disappearing fast simply because people refuse to 
talk to each other.  Telecom's Xtra has caused some grief by its actons 
in what was a thriving industry, those industry members all having 
responded in writing asking to be heard but completely ignored by Telecom.
So when these ISPs try and make themselves heard by Telecom via other 
means are you really surprised?  From the ISP perspective Telecom's 
attitude is quite arrogant leaving little doubt in the minds of the 
industry exactly what Telecom's intentions are. 

I must admit I often laugh to myself when I think of Telecom and the 
Internet as it reminds me of the artical in the Dominion on Monday 
September 19 1994 by Mr Zwimpfer stating so positively that the Internet
was not for Telecom and could never be a success.  Now Telecom are 
scrambeling to take it over as they see it as the biggest threat their is
to there dominance in the future communications market.

So now we see Telecom rushing to get out there and take over all it can 
before its competitor Clear can get out there..... yet the plan is falling
around Telecom's ears as the service seems to be falling to bits all 
over the place with security issues, network problems and now we cannot 
stop hearing about access problems with a network that has only 15,000
users but was designed for 50,000.  Of course Telecom's media machine 
is doing its best to counter the actuality and severity of the problems 
but few people in the industry are fooled by it.  Better to be honest 
and admit problems when they arise and get them sorted rather than 
being dishonest with you customer. The internet is a different world to 
the telecommunications that Telecom is used to.. one cannot continue to 
fool your customers all the time.

I wonder does Telecom have an xtra.general where it's users can publicy
discuss these sort of issues.... perhaps we should create one for you. 
Something like nz.isp.xtra.general where your customers and competators
can openly and in public put forward complaints and concerns over what
is happening.  :-)  I wonder how busy the group would be.

Okay, business is business and Xtra has as much right to be an ISP as 
anyone.  Not a problem as long as the deal for Xtra is the same as 
everyone else gets but when a wholesalers goes into the retail market 
and gets what appears to be plain preferential treatment from the 
wholesaler what can the rest of us do?   Yip, that's right, complain. 

What happens when you conner any animal with intent to kill....
The advertising and the reality are to different beasts.

My personal thoughts of course.

Cheers
John

-- 
John Vorstermans   			|	Choice, not chance
Actrix Networks Ltd.			|       determines destiny.
282 Wakefield St. Wellington		|	
Phone:  +64 4 801-5225 			|