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A tale of two cities

A tale of two cities

It was the best of times for Banksia and the worst of times for NetComm. The former enjoyed phenomenal growth, while the latter had to reposition itself, restructure and finally announce plans to merge with its more fortunate rival.

The end result - network resellers have one fewer local modem supplier. But that one local supplier that remains will be a strong one.

Banksia established its reputation in 1988, with the introduction of the PhaxSwitch. This device revolutionised small office communications, by allowing a single phone line to be used for both voice and fax facilities, and gave the company a springboard that led to strong growth in the modem market.

NetComm, which first traded as a public company in 1994, also enjoyed good early growth, but seemed to stumble last year. So at the time when Banksia embarked on an acquisition strategy NetComm was facing the prospect of a loss.

One of the problems facing modem makers everywhere is that for the increase in speed there is no corresponding increase in price.

Consider that just a few years ago before my local phone exchange was upgraded to a digital switch, the fastest speed modem I could use was 300bit/sec. That was fine for character-based bulletin board services and I could easily justify the price of around $200 for such a device.

In economic terms I paid 66 cents for each 1bit/sec I could transfer.

Consider today's ESP of $150 for a 33.6Kbit/sec modem. You are selling the end user each 1bit/sec capacity for less than half a cent.

That's an improvement in price/performance of better than a factor of about 130 to one. It is arguably a faster improvement in performance than any other item of computer hardware.

In a market like that it may take just a fractional amount of bad luck to bury you and just the same fractional amount of good luck for continuing good fortune.

What is certain is we shall mourn the passing of another local manufacturer.

John Costello Tel (02) 9902 2778 Fax (02) 9438 2410john_costello@idg.com


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