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Wednesday, 02 July 2008 12:25

Naked DSL blows ill wind for Telstra as iiNet rakes in customers

In what must be a worrying sign for Telstra's traditional voice telephony business, naked DSL is proving to be a smash hit for Australia's third largest ISP iiNet and its customers. iiNet claims it has signed up more than 25,000 households in six months, and that two-thirds say they're saving at least $20 per month on Internet and phone charges.

Naked DSL is the provision of Internet connectivity delivered over a phone line that does not also carry a conventional phone service or the associated Telstra line rental charges (at least not on the customer's account).

A decision by the ACCC (Australian Competition and Consumer Commission) forced Telstra to rent its copper lines to ISPs at prices that allow them to provide competitive services. ISPs began offering naked DSL in late 2007.

This was bad news for Telstra, as recent years have seen call costs remain static or fall, while line rental charges have increased.

Where people kept their Telstra line in order to obtain ADSL service, they have been increasingly turning to independent VoIP providers such as MyNetFone and Engin to further reduce call costs. ISPs such as iiNet are increasingly bundling VoIP with Internet services.

If naked DSL customers want phone service, VoIP provided by the ISP is an obvious choice. The switch from PSTN to VoIP is further eased by providers such as GoTalk which can port the customer's existing number to a VoIP service.

So what's happening with the one-third of iiNet naked DSL customers that say they're not saving at least $20 per month? Please read on.

Given that they're avoiding the normal line rental fee (typically between $20 and $30), and that VoIP call costs are generally substantially lower than conventional charges (eg local calls around 12c instead of 20c, untimed national calls, and international rates from a couple of cents per minute) it's hard to see how they can't be saving money.

And the mystery deepens when you realise that iiNet's iiTalk VoIP service provided with naked DSL plans provides free local and national calls (subject to a 'fair use' rule, otherwise the charge is 15c untimed), though you can see why 20 percent of customers said they were saving over $40 per month.

The best explanation I can offer is that some people are applying the savings they make on phone charges directly towards an Internet plan that provides higher speed, a bigger download quota, or both.

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Stephen Withers

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Stephen Withers is one of Australia¹s most experienced IT journalists, having begun his career in the days of 8-bit 'microcomputers'. He covers the gamut from gadgets to enterprise systems. In previous lives he has been an academic, a systems programmer, an IT support manager, and an online services manager. Stephen holds an honours degree in Management Sciences and a PhD in Industrial and Business Studies.

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