Telstra price cuts hamper broadband rival

Telstra price cuts hamper broadband rival

Telstra’s recent slashing of broadband prices is hampering rival Unwired’s ability to find wholesalers for its fixed wireless broadband offering.

However, CEO David Spence told those present at yesterday’s launch of the service that the eventual impact on his company should be minimal as lower broadband prices would boost the market.

Just $5 separates Telstra's $29.95/month offering from Unwired’s most basic wireless broadband service.

Spence said this was worth it, considering his own product’s extra convenience.

Unwired prices range from $34.95 for a Kickstart wireless service, offering 256Kbps with 300MB maximum at broadband speeds, to $119.95 a month for the Unleashed service, offering 10GB at 1024Kbps.

Usage above these limits is then throttled to 64 and 256Kbps, respectively.

There will also be a $200 connection fee, with $100 and $200 rebates for six- and 12-month contracts.

The company enjoyed its first real customers this week, as sales were taken on its website. Sixteen call centre staff will offer customer service from Unwired’s central Sydney headquarters, backed by a channel manager and a channel support person. Overall, the company employs 66 staff.

Unwired’s multiple channels approach will also see its broadband service offered through resellers, retail chains, value-added resellers, agencies, virtual ISPs, major ISPs and carriers.

To date, Unwired has announced the carrier, People Telecom, as its sole wholesaler. In the long-term, it expects two-thirds of sales will be through third parties.

Spence said familiar retail names, such as Harvey Norman, would be stocking the Unwired wireless broadband offering, with larger organisations and wholesalers more likely to wait until the broadband service was more established.

Unwired expects to have erected 73 base station towers - which will provide fixed wireless broadband coverage to 95 per cent of Sydney homes - by August this year.

Resellers should also include businesses which currently sell DSL services.

Value-added resellers could cover software companies looking to bundle the broadband with other products, while agencies may similarly bundle the broadband offering with other services and sell the Unwired offering under another brand.

Telstra’s slashing of broadband rates in February forced Unwired to reduce its prices to $10-$15 lower than it had expected.

“It lowered the margins at the lower-end of the marketplace for our wholesale customers," Spence said. "That makes it hard [to attract wholesalers]. That’s part of what Telstra tried to do.

“We hoped the product itself would be good enough [to attract wholesalers]. It has just made it harder. We are in negotiations with a lot of people, some of which will wait until the network stablises before committing themselves to the Unwired service."

Unwired promises margins of 35-40 per cent to its channel. While Telstra’s pricing intervention has kept margins the same in percentage terms, more money could have been made on each deal had the pricing cuts not been introduced. Nonetheless, the company hopes lower prices - boosted by Telstra advertising - will raise awareness of cheaper broadband and enlarge the overall market.

“The key [for our channel] is it’s a simple sell," Spence said. "There is no filling in of forms. You buy a box, take it home and get connected. Our resellers might also be able to sell a router and connection equipment."

Unwired said it needed 50,000-70,000 customers to be viable. On top of its August infrastructure deadline, the provider plans further roll-outs of the service in regional NSW towns and also other state capitals by year-end.

The company also aims to launch a voice-based service by then.

Spence certainly saw Telstra as the enemy, pointing out that Unwired is entirely Telstra-free from end-to-end.

Unwired infrastructure partners include US-based Navini Networks for the base stations, Ericsson for the network operation centres, Airspan for backhaul equipment, Uecomm for Ethernet services and Cisco for routers and IP switches.

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