Digital Island: being an MVNO is all about the bundle

Communications Day, Bill Bennett, Monday 15th August

In the two years since Digital Island became the first MVNO to sell Telecom NZ’s XT network the company has carved out a small niche serving New Zealand’s medium sized businesses. It’s a lucrative niche, with an ARPU of NZ$125 per month before GST. Now the business is adding UFB services to its offering.

General manager Blair Stewart said his company is mainly geared to dealing with fleet customers who need to cater for between ten and a few hundred users. It’s a specialist market sitting between the large scale corporate accounts attracting the major players and the micro business market which is largely served by the carriers with consumer-style offerings.

Stewart said the key to servicing medium sized companies lies in taking complexity out of their relationship with a service provider. He said: “It’s all about the bundle.” Digital Island packages mobile telephony along with fibre and SIP. It is the only telco in New Zealand to offer group calling rates between SIP and mobile. Stewart said: “No-one else is pushing business VoiP out into the market yet.”

Mobile termination rates have helped Digital Island sharpen its pencil. Stewart said to date most of the other carriers have been slow to pass on all the savings to their customers: “There’s a feeling out there they can get some of the margin back they’ve lost to competitive forces in recent years.”

Rather than use MTRs to cut calling rates, Stewart said he has used the lower prices to offer more services at the same price: “If we’re going to pass on the savings, we’ll do it with our IP plans. Our customers want to be able to call from their mobile phones to anywhere.”

Digital Island’s relationship with Telecom Wholesale is crucial to the Stewart’s business. He said Telecom NZ has been serious and committed to the MVNO relationship: “Telecom NZ provided a lot of support for us to get out there and do some business. We’re able to price competitively and win customers but we’re not in the same position as 2degrees which could come into the market with a heavily discounted offer.”

The New Zealand government subsidised UFB features large in Stewart’s planning. He said: “We’re now selling UFB to medium sized companies. We were selling companies fibre plans for NZ$1,000 a month, with UFB the price has dropped to NZ$500 a month. Other players sell UFB to business clients at a much higher cost. We’re selling it with SIP trunks, hosted PBX and a video call product”. Stewart said the business desktop video is about to explode in New Zealand and will change the way companies operate.