Smaller ISPs struggle nowadays if they stick with offering a vanilla service. To succeed they need to add value. Two local ISPs show how they did just that in very different ways. Johanna Egar reports
The days of being a simple ISP providing a plain-vanilla internet service are long gone. Technology doesn’t stand still, and while this poses a challenge it also provides opportunities for creative ISPs to change and grow.
Two very different New Zealand ISPs – business-focused DTS and broadband-plus-power specialist Megatel – have both harnessed technology changes to provide extra value to their customers in quite different ways.
DTS started out in Wellington in 2002 and just four years later expanded into Australia. DTS’ managing director, Steve Ritchie, says he noticed early on that a lot of his customers operated on both sides of the Big Ditch and there was a need for trans-Tasman connectivity. DTS specialises in serving these connectivity needs and now covers both countries totally with its bespoke WAN (Wide Area Networking) business solution and high-quality VoIP (Voice over IP) service.
DTS’ services are particularly valuable to those companies that have several branches. For our interview, we connected via a Wellington telephone number, but Ritchie was on Australia’s Gold Coast and I was in Auckland. The sound quality was excellent.
“We’ve always ensured we have good pipes,” says Ritchie. He says DTS has always been a business ISP, so quality is important. The company also constantly looks ahead. “We continually plan. We sit down and think, and plan. And we are always looking for new products and services we can offer our customers.”
In line with this, DTS has recently introduced two new services. One is a new softphone service. This VoIP-based service uses a simple app downloaded from Google Play that connects desk and mobile phones. It means users can answer calls on either phone wherever they are. The technology is licensed from the US’ CounterPath and managed in-house by DTS.
The company has also just launched a rather unusual service for an ISP – a virtual reception service. DTS has teamed up with a contact centre to provide the new app-based remote answering service. Tailored to customers’ specific business needs, the software behind it displays a customer’s unique company information on-screen to the ‘receptionist’ at the call centre, so he or she can act like they are working in-house. The service runs on DTS’ internet and uses its VoIP facilities.
Ritchie says DTS is more of a managed service provider than a simple ISP these days, but boundaries between the two are becoming blurred.
“Bandwidth is becoming a commodity, so you have to offer other services like VoIP or WAN, or managed services," says Ritchie. “You have to provide value or you are simply a utility. You need to provide good products for people and you can’t have a utility attitude.”
Analyst Gartner’s telecoms specialist, King-Yew Foong, echoes Ritchie. He recently looked at what smaller ISPs can do to compete with larger telcos in Gartner’s report, Market trends: top five disruptions for CSPs (communications service providers) worldwide, 2018-2023.
One strategy smaller ISPs can adopt is to partner with those in other business areas, says Foong. Which is exactly what DTS has done with both its new products. Foong advises ISPs to “be like supermarkets and sell others’ products, and bill on behalf of your partners.”
Partnering is a big part of our other ISP Megatel’s strategy. But it is also involved in customer account management and billing. The latter is an under-rated but complex and important part of delivering utility services. One of Megatel’s main services is a double utility broadband-cum-power package.
Power & Asian TV – unusual mix works
Megatel has been offering a triple-play service – mobile, internet and TV – to Auckland’s Korean and Chinese communities for several years. The Albany-based company’s youthful founders noticed this was popular in Asia but hadn’t yet reached New Zealand. At the time, other ISPs were offering just a basic broadband service.
Megatel’s founders Jisan Jang, known as JJ, and Jakob Lee still keep a close eye on the Korean market especially, as it tends to be ahead of New Zealand.
But the company didn’t stop at triple-play – it also pioneered broadband-plus power in New Zealand – ahead of Trustpower. Its partner is Auckland’s Vector. Power has become a very profitable part of Megatel’s business and has also allowed it to move out of its original niche and attract mainstream business customers who are interested in the cheap power element of the package.
“If you are small, it becomes difficult if you only provide broadband. You have to be creative and add value to your existing product. I strongly believe that the only way to stay in the market and win customers is by bundling and providing customers with services”
Megatel’s Jakob Lee, now CEO, says the company is always seeking to add value for its customers. For instance, Megatel will upgrade new power customers’ legacy electricity meters to a smart meter for free if necessary. Although Lee says 80 percent of New Zealanders now have these smart meters. However, as Megatel is about to launch a nationwide pre-paid broadband and electricity product – starting with the Bay of Plenty and Waikato – this will be of value to some new customers.
Lee says, “If you are small, it becomes difficult if you only provide broadband. You have to be creative and add value to your existing product. I believe that the only way to stay in the market and win customers is by bundling and providing customers with services.”
Although Megatel started with a simple 15 percent power discount to attract customers, it has now gone well beyond this with the aid of SDN (Software Defined Networks) technology. This new technology puts elements of the telecoms network in the cloud. Importantly, it allows ISPs to have the kind of digital relationship with their customers that Netflix, Amazon Web Services or Google enjoy. For instance, customers can make changes to their service at the click of a button, rather than needing technician help.
Megatel is simplifying its pre-pay broadband-cum-power packaged service for customers in this way. Customers can now easily check their balance or top it up using an app Megatel has developed.
SDN technology helps ISPs too. Lee says that “on the management side, the automated systems we’ve built mean that to deal with [say] 2,000 customers we only need one-and-a-half service centres. And our automated smart app helps customers make multiple requests.”
Megatel is also expanding its TV service into the region. It offers Korean and Chinese television programmes, either through the set-top box it developed early on, or over PC or mobile. It is now expanding this service to Vietnam and Thailand, no doubt helped by the fact that its youthful staff speak up to four North Asian languages, as well as English. Megatel’s service offers more variety and is also cheaper than satellite-delivered television.
To grow in this way, Megatel is expanding its multiple television partnerships even further, a textbook example of what Gartner’s Foong recommends smaller ISPs do.
Gartner’s other recommendations include looking to the universities and the start-up world to access the funding and skilled staff small ISPs often lack. Foong also recommends taking advantage of cheaper cloud services like security firewall services, as well as SDN, which puts telecoms routers in the cloud.
“Using these cloud-available services is a ‘disruptive play’ for ISPs as telco incumbents have expensive network infrastructure they need to maintain” says Foong. He points to Singapore-based MyRepublic’s use of SDN for its MySDN WAN service. The ISP – it is a very large one with a small New Zealand presence – advertises this service as being much more flexible than a traditional WAN. For instance, it allows for immediate changes and can also be set up quickly because it is software-driven. Megatel is also obviously making good, if different, use of SDN technology. But it’s not the only one. Another local ISP, Napier’s NOW, is also doing so – see story in our news section.
WHAT THE TELCOS ARE DOING
The big telcos, Spark, Vodafone and Vocus, have also been keen to add value to their services. And power companies like Trustpower have got into the market from the other end, adding broadband services to their power offering.
For example, Trustpower offers a variety of broadband plans along with its electricity and gas service – plus a free fridge, washing machine or television for new sign-ons. A sign of just how competitive the power-cum-broadband market has become.
Spark has two big added-value offerings: Lightbox, its television service, and Morepork, its home security offering. Lightbox serves up popular TV shows that can be watched on multiple devices – from smart TVs to laptops to tablets. Morepork is Spark’s home security service which allows you to monitor your home from your mobile or a web portal.
Vodafone also offers an internet-delivered television service. Customers using its fibre network can enjoy a consolidated TV service that delivers Sky TV, free-to-air television and a range of online and app-based entertainment services, including Netflix, via just one set-top box.
Then there is retail giant The Warehouse which works with 2degrees to offer a budget mobile plan aimed at people who make a lot of calls but don’t use much data.
Vocus Communications has chosen to expand into the energy market. Vocus has CallPlus, Slingshot and Orcon under its umbrella and specialises in corporate telecommunications services but also offers a discounted electricity and broadband package for consumers. This comes courtesy of small power company Switch Utilities, which it bought in 2016.
Lastly, there are two notable ISPs worth mentioning: PrimoWireless and Voyager. We covered both ISPs in the last issue of The Download. PrimoWireless runs Taranaki’s rural wireless internet service but also runs a VoIP service over the broadband fibre it uses. This provides a backbone for its mainly rural service. While ISP-delivered VoIP services are common, Primo’s adds real value for its rural customers. Voyager has moved in quite another direction. The business-focused ISP has transformed into a much broader company and now offers a cloud-based PBX service, as well as modern video-conferencing services.