Vol. 13, No. 5 - May 2004
Two young Aucklanders have set up the company, which starts advertising this month to offer small to medium enterprises (SMEs) cheaper telecommunications.
Because unless you’re a large company with plenty of leverage, generally you wont be getting a good deal from Telecom, says Managing Director Blair Stewart (31). It’s a full frontal assault on the toll market, he says.
As well as offering international tolls, Digital Island provides competitive rates for calling nationally and to cell phones. Also on offer are 0800 numbers locally and internationally, and other services such as call conferencing – the latter only provided by Telecom and TelstraClear in New Zealand previously.
After four years as Head of Information Technology (IT) with the no frills, low cost easyJet Airline in the UK (and formerly with Freedom Air in New Zealand), Stewart reckons he knows how to operate a lean, mean machine to save customers money.
Basically, the key is a strong focus on e-commerce – using the internet for customer registrations, email for billing, and electronic methods for payment processing.
“The business model is simple. We provide high quality communications at low prices. We don’t make our customers sign contracts, all our calling rates are the same day or night, and the quality and reliability is the same as what you would get from a major telco,” Stewart says.
The company’s sub-leased office in Khyber Pass is functional – not glossy – there are no designer Italian couches or personal assistants. Stewart’s business partner is close friend Stu Cowdell (31) who manages sales. His background is selling technology solutions here and in the UK, mostly in banking and communications. Digital Island will not be known for big marketing lunches or flash advertising campaigns associated with traditional telecommunications companies.
But its product mix is unique at the second and third tier telco level and designed to address the requirements of SMEs. Users who switch to Digital Island don’t have to change phone numbers and will still get billed by Telecom for line use but separately by Digital Island for tolls.
So far the company is finding the average small business spends around $600 a month on telecommunications, and Digital Island reckons its bills will be 25-30 per cent less, depending on the proportion of calls made internationally, where the greatest savings can be made. Aside from their products’ associated wholesale costs, the company’s biggest cost by far is investment in developing their online presence. “We want customers to be able to manage their account themselves via our website; the self-help approach is good for everyone.”
Stewart and Cowdell are far from afraid of the competition – rather, that is what drives them. At last count, in the UK there were 276 registered telecommunications companies, so there must be room for more in New Zealand, they say.
“Telecom controls over 90 per cent of the fixed line market and as a result is hugely profitable. This market is not competitive, it’s largely a monopoly compared with the US and UK where people pay a fraction [compared to New Zealanders] for telecommunications... it’s not fair. We want to drive competition in New Zealand. We intend to be at the front of the major changes ahead.
Anticipated changes include the local loop being unbundled, (ie, to allow competitors access to Telecom’s phone lines). This month the Government is due to make it’s decision following the final report submitted by the Commerce Commission last December. If the Government doesn’t unbundle the loop this time, it will eventually, says Stewart.
This will open the door for the future widespread use of IP (Internet protocol) telephony whereby people run a phone, computer and other, perhaps streaming media, on a single data connection, currently not affordable for many small businesses or homes.
