Internet and phone company Orcon says it will be the first to market a true alternative to Telecom's fixed-line telephone and internet services.
Orcon regulatory manager Scott Bartlett said the provision of voice over internet protocol (VoIP) - which is phone over the internet -would be particularly significant because it would allow consumers on a large scale to cut the cord with Telecom.
From May, customers would no longer be forced to rent a phone line from Telecom for phone and internet services, he said.
"It is the first truly differentiated offering to Telecom. It won't be like other internet service provider offerings that are dependent on how fast your broadband line goes or how the service runs," said Bartlett.
Orcon has already invested $2 million in an internet-based voice switch from global network company Siemens.
The system will allow the company to provide a number of features including VoIP, internet protocal television (IPTV), fixed-mobile convergence and a service where phone, mobile, and email all work together called unified messaging.
To provide the service, Orcon will resell and use Telecom's phone line to connect to its IP-based technology which switches the line to an IP based network. The company plans to sell packages of broadband, video services, internet television and a phone line for $50 to $60 a month.
"We are going to take a heavy loss leader in the market by providing these services," said Bartlett.
The company is trying to grab as many customers as it can before Telecom opens its network to competitors (known as local loop unbundling and expected in the middle of the year) and other telcos start to offer similar services.
Orcon, which controls 7 per cent of the internet market, expects that to grow to an 11 per cent share this year and hopes to take a similar share of the overall $8 billion phone and internet market.
Other competitors are waiting for Telecom to be forced to open its network to competitors under the Government's Telecommunications Amendment Act before offering a complete alternative to Telecom's fixed lines.
The legislation allows for the creation of three broadband services - unconstrained wholesale access, separation of phone and internet services or "naked DSL", and the opening of Telecom's network to rivals' equipment.
IDC telecommunications analyst Darian Bird said Orcon would be one of the most competitive internet companies because of its size and strategy around phone calling.
"ISPs are racing to gain broadband customers now, even at a loss, in the hope of becoming profitable once the local loop is unbundled. The challenge is developing a voice strategy at the same time, to be able to provide a full service to customers.
"There's a lot of talk around cost savings associated with local loop unbundling and naked DSL, but most New Zealanders will still want a home phone. ISPs will need to provide this, either in the form of VoIP, in the case of Orcon, or over the mobile network, in the case of Vodafone."
Only the largest ISPs would have the funds to invest in infrastructure once the local loop was unbundled, which put Orcon in a strong position, he said.
Telecommunications analyst Paul Budde said Orcon's move was brave but he did not believe there was room for it to build its own network.
"The majority of players are far better suited to niche markets than to mass markets.
"If you are going to make a play for the consumer market, you need to merge with other companies to be of any significance as a competitor to Telecom and Vodafone on an infrastructure level."
Bartlett said Siemens had provided the software - the latest and greatest in services - for many large telecommunications companies, including Deutsche Telecom.
Telecom declined to comment.By Jenny Keown Email Jenny