Costs to cut ISP numbers

RATIONALISATION within WA’s Internet service provider (ISP) industry will continue, while the minimum threshold number of Internet users that ISPs require to remain economically viable continues to rise, according to EF Tel chief executive officer Simon Ehrenfeld.

Mr Ehrenfeld told WA Business News that, due to demand for higher levels of customer service – such as help desks being available for customers seven days a week, and the cost associated with the increased service levels – the smaller sized ISPs simply would not be able to remain economically viable.

“You used to be able to run an ISP with a few hundred customers,” he said. “That is not the case any more.

“The ISPs that are trying to deal with a handful of people just can’t keep up to speed in terms of the account support, the help desk support and the networking support.”

The move by ISPs towards broadband Internet connections over dial up connections was another issue Mr Ehrenfeld said would lead to further trouble and rationalisation within the industry. A price war for broadband connections had already begun, he said.

Mr Ehrenfeld said an example of the industry’s rationalisation had been the dial up price war of a few years ago – led by OneTel – which had a significant effect on the industry and was a precursor to the demise of Dingo Blue and OneTel.

“Some people are already trying to get cut-throat in the pricing here [in Perth] and we believe that it will have the same disastrous effect; that’s our position,” he said.

“You can’t sell Internet connections below cost and continue to give people good service and continue to stay in business.”

Although industry sources contacted by WA Business News described the current business climate as average at best, it is not all doom and gloom. There is still confidence within the industry that the current climate will improve. The tough times have, if anything, made businesses look for better ways to do things and to improve efficiency.

WestNet managing director Peter Brown said his business had experienced consistent growth over the past three years, and that he believed that trend would continue in the near future.

He said a significant concern for the industry, however, was the lack of broadband service availability in WA.

“ADSL is definitely taking off rapidly as prices become a lot more attractive, especially in WA, and I am sure we will see some big changes towards more ADSL in the next 12 to 24 months,” Mr Brown said.

Mr Erhenfeld believes that within three years the majority of Internet users will have a broadband connection.

He expected the number of EF Tel Customers using broadband connections would at least double over the next year, as prices become more competitive with dial-up connection costs.

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