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Orcon's UFB pricing ploy: brave or foolish?

08 Mar 2012

Good on Orcon for yesterday’s announcement of a suite of plans for connecting customers over the embryonic Ultra Fast Broadband (UFB) network.

Being the first ISP out of the blocks with a significant offering of UFB deals is a bold marketing move, but will it backfire?

First, let’s consider the company’s motivation for wanting to be first to charge out of the trenches into UFB no man’s land. Does it have anything to do with Orcon being government-owned, as a subsidiary of SOE network company Kordia? I don’t think so. 

While it’s easy to see the political benefit of some attractive pricing being announced early on for the government-funded UFB, there’s no suggestion Orcon has been pressured by Wellington. It’s always been a challenger brand with a technology-savvy customer base so is more inclined to take the lead on new initiatives than competitors such as Telecom.

But launching a high-profile UFB service marketing campaign at this stage is fraught with risk. Most consumers don’t yet have an appetite for the faster speeds the new network will offer, and certainly aren’t prepared to pay more for them.

Hence the focus in Orcon’s press release yesterday on its entry-level UFB plans being priced on a par with existing internet services.

Added to the marketing difficulties is the fact that the service isn’t available in most places yet and its arrival is out of Orcon’s control. Potential customers face the rigmarole of having to research if and when the service will be available to them.

Despite the pitfalls, Orcon will be hoping that moving first will give it an advantage over its competitors – the other so-called Retail Service Providers.

At this stage it seems most RSPs are yet to sign deals with the four companies building the network, a prerequisite for selling UFB services.

Northland network builder Northpower Fibre lists three RSPs on its website. Interestingly Orcon isn’t one of them, even though its announcement yesterday included Whangarei amongst the centres where it was signing up UFB customers.

Central North Island builder Ultrafast Fibre has just one RSP listed on its website but says it has interim agreements and letters of intent signed with a number of others.

Christchurch’s Enable Networks has lots of RSPs signed up to service the business market but none yet for the residential market

And the latest word from the biggest network builder, Chorus, is that it is ‘currently hard at work with a range of retail service providers’. Chorus hasn’t yet confirmed this hard work has resulted in any contracts being signed, although Hawke’s Bay’s Airnet said last month it was the first ISP to complete an RSP agreement with the company and it is now offering UFB plans to business customers with access to the service.

CallPlus and Slingshot may be the next major ISPs out of the blocks, saying they plan to release UFB pricing details next month. But as CallPlus/Slingshot CEO Mark Callander has pointed out, customers are unlikely to get excited about the new service until they see fibre cable being laid outside their home.

In the meantime it is the job of Government, the network builders and the retailers to educate and attempt to excite consumers about the potential benefits of UFB. Orcon’s announcement yesterday was the latest piece of UFB hype. Expect much more to come.

For more information about Orcon's fibre options click here.