KEY POINTS:
It was always going to be the case that the might of Vodafone branding and marketing would eventually subsume the ihug internet brand.
But all the same, I'm sad to see the ihug laid to rest, even if the company has been 100 per cent owned by Vodafone
for a couple of years now.
For a period in the late nineties and into the millennium, ihug was the country's most-loved internet brand, the New Zealand equivalent of America Online.
It wasn't the first internet provider in the country, but it was the first to capture the imagination of a generation of new internet users. That was mainly down to the innovative and disruptive deals its enterprising founders, brothers Nick and Tim Wood, came up with. Barely a year after establishing itself with an $8000 loan and single Commodore computer in 1994, the internet Home Users Group (ihug) had shaken the market up with a move to flat-rate priced dial-up internet access for $39 a month.
It is easy with the passage of time to forget how significant that move was in terms of the development of New Zealand's internet access, especially given the hardball attitude Telecom under Rod Deane had towards its competitive minnows in the 90s.
A magazine article from 1995 illustrates well what ihug and its fellow fledgling internet providers were up against at the time.
"The crux of the matter for all new market entrants is that competing effectively requires Telecom's co-operation, which, as a publicly held company intent on maximising shareholder returns, the company has little incentive to provide," wrote visiting Wired reporter Rob Johnstone.
"An interesting side effect of a fully deregulated environment, it seems, is a constant clamour by new competitors for more regulation [to their benefit, of course]. So far, the Government has chosen to ignore them," he continued. There was more innovation in 1997 when ihug launched the first national residential broadband service. It used satellite to deliver download speeds faster than dial-up though users still needed a home phone connection for uploading data, which happened at dial-up speed. Vodafone had only just arrived on the scene, scooping up the mobile network owned by BellSouth.
By the late 90s it was clear the Woods were beginning to lose interest. They were now Rich List starlets and there was a move into selling telephone services to generate fresh revenue streams. But without any movement on the regulatory front and the second-tier market full of me-too operators selling internet connections, there was less scope for bold new moves. By 2002, Nick Wood had retreated to Fiji, his brother equally distracted with a stint living in France and new business interests.
Ihug held on as a solid third player in the market behind Telecom's Xtra and the merged forces of TelstraClear's Clearnet and Paradise internet businesses. People were still fond of the company.
Back in 2004 there was a misguided move to cash in on that legacy. The semi-retired Wood brothers were drafted back in for an advertising campaign that harkened back to the "revolutionary" days of the company. Just to ram home the point, Fidel Castro's face fronted the adverts.
"Nick and Tim aren't involved in day to day operations, but they're part of this company's history, and we're proud of our history. It's one of the things that makes us different," an ihug press release at the time read.
But the billboards weren't up long before a different strategy emerged. Ihug was on the block and the Australians came calling in the form of ambitious Perth-based internet provider iiNet.
Things looked promising because iiNet was creating a stir across the Ditch with its plans to use the local loop unbundling provisions available in Australia to bypass Telstra.
There were Powerpoint presentations about how the iiNet strategy in Australia would be implanted here, once New Zealand was finally unbundled. But it wasn't meant to be for iiNet which, faced with its own accounting debacle and with unbundling still a pipe dream, offloaded ihug to Vodafone.
Now we have Vodafone, which, with the ihug buy-up, signalled a change in global strategy from partnering with fixed-line internet providers to becoming one itself. Vodafone is the dominant mobile operator in this country and has been aggressive in pushing broadband deals. But can the local arm of a global empire with a vested interest in the mobile phone world carry on the ihug spirit, if not the name?
And where are the new challengers to the incumbents, the players who are going to change the game again? There's been so much blood spilt in the ISP industry it is hard to know where to look, though old independent stalwarts like CallPlus and WorldxChange battle on. And long may the little ones flourish. Or as Castro would say, "long live the revolution".
