Dial-up dies as experts warn of broadband plan conditions

The past few weeks has seen Internet providers deliver a raft of intensely competitive broadband deals -- albeit conditional -- as research compiled on behalf of Ericsson reveals that the number of broadband subscribers in Australia is likely to overtake dial-up by mid-2006.

The research, conducted by the Melbourne Business School across Australia and New Zealand, showed the Kiwis would not be far behind, with broadband subscriber numbers likely to overcome dial-up by early 2007.

Ericsson's study, released today, comes amid a fierce fight for broadband Internet subscribers to the point many providers seem to be prepared to lose money in the short term to seize market share.

Optus upped the ante last week with the announcement of an offer of up to four months' free broadband every year when customers bundle with other Optus voice products. The deal, which starts this week, also includes a three-month free broadband access for customers who choose to take up OptusNet broadband with their Optus fixed line telephony or post-paid mobile plans.

Another provider, Exetel, also recently announced that, starting this week, it plans to offer a 1.5Mbit/ADSL plan with 500MB usage for AU$25 per month.

In a report on the broadband community Web site Whirlpool, Exetel also said it expected Telstra would ditch all 256K and 512K plans before Christmas and cited industry rumours that the telecommunications heavyweight would drop its AU$80 line activation fee. This move is expected to create a surge in broadband uptake that would establish 1.5MB/s as the new entry speed.

WestNet also joined the fray, announcing a free sign-up option for new customers to its broadband plans -- one of the major costs when customers upgrade from a dial-up connection. The catch, however, is that customers will have to pay a higher disconnection fees within the first 24 months.

WestNet said customers would save AU$99 when signing up to their broadband ADSL from now until the end of this year. But with the new free ADSL service connection options, customers faced an AU$115 fee if the connection is cancelled within 6 months. The fee is AU$60 if cancelled in 7 to 12 months, and AU$40 if in 13 to 24 months.

Netspace announced last Friday that it had revised its list of ADSL plans, particularly its 512/512 speed range. The range starts from AU$74.95 including 5GB/5GB of data and offers "no contract" setup options with installation costing AU$149 and rapid transfer costing AU$59.

Primus Telecom slashed its broadband ADSL service price last month after it was named "Best ISP" at the Australian Telecom Awards in Sydney. The price for the 256k broadband service with 200mb of included data has been cut from AU$29.95 a month to AU$19.95.

OzEmail has given its customers the option of taking on its business and consumer broadband services on a month-to-month basis with no fixed term contracts starting last July.

All plans remained the same in download allowances, speeds and monthly prices. However, customers are charged an upfront fee of AU$99 for line activation and an additional AU$99 for the modem, which previously came free on an 18 month contract plan.

OzEmail also previously told ZDNet Australia  that customers that terminate their connection within the first three months will incur a fee of AU$55, which it said is passed over from the charges OzEmail receives from Telstra.

OzEmail's monthly plans start at AU$29.95 per month for a 300MB download limit and maximum speeds of 256Kbps, which is speed-throttled if the download limit is exceeded; and unlimited plans start at AU$49.95 with a 256Kbps download speed.

A new player called AstraTel recently launched its no contract Astra Box plans of AU$59.95 for 256K speed in Australia which includes "unlimited calls within Australia, permanent connection, backup dial-up account, and unlimited download and upload."

Customers will need to pay a once off setup fee of AU$49 for the phone and AU$129 for the ADSL. Other Astra Box plans also include AU$79.95 and AU$99.95 options. Fevre said these offers are very similar to offerings found in European countries.

Meanwhile, Colin Goodwin, group manager Broadband for Ericsson ANZ, said many Internet users already found dial-up Internet access "almost unusable".

Dr. Pat Auger, associate professor of Information Systems and eCommerce at the Melbourne Business School, noted particular consequences as the digital divide becomes greater.

"There are very serious effects that we'll have to face as broadband increases the gap between the 'haves' and 'have nots'. Australia and New Zealand broadband availability certainly needs to be accelerated, which is a deep concern if we want our countries to operate on par with the rest of the developed world," Auger said.

The study found that the key drivers for switching to broadband in both countries include higher data transfer speeds and preventing the Internet from blocking phone line access.

The research also showed that consumers also consider the cost of monthly fees as the most important factor when choosing a broadband connection. Installation fees and download limits are moderately important, while contract length and charges for excess downloads are less important.

Auger added that in Australia "a key to structuring broadband packages lies in offering affordable broadband subscription fees without overly restrictive download limits."

International Data Corp telecommunications analyst Landry Fevre said that with 100,000 new broadband subscriptions taken out every month on average, they are expecting the total user base in Australia to reach 4 million by 2008.

He added that although the competition will be very good to customers, it will still be hard for customers to figure out which broadband package is best for them.

"It is very good for the customers because of the competition between ISPs. However, it will be very tricky to compare plans since it has become more complicated with these different types of offerings. ISPs will not be making it easy for consumers to compare the deals so consumers will have to research it themselves," Fevre said.

He added that broadband prices were not likely to go down too much more as ISPs focus more on the offer they place with their current prices, such as download caps. Fevre added that with the speedy changes occurring in the industry, customers should not put themselves on any contract, even for just 12 months.

Fevre expects that it will be tough for the smaller ISPs to compete with the bigger players especially once the dial-up ISPs decide to move into offering broadband services.

"It's really tough for the smaller ISPs since a lot of them are big base of dial-ups. To move to broadband it's almost like a new business for them. It would be very tricky and I'm sure a few more players will come in as well. To move to broadband is a totally different ballgame for them," Fevre said.

The Ericsson study shows that majority of broadband subscribers use the Internet more often since switching to broadband from dial-up. On average, Australians spend 17 hours per week if using dial-up access, but 23 hours per week if they are on broadband.

The survey also showed that respondents who have moved to broadband said they will not be moving back to dial-up.