Service key to minnow's growth among predators

Michael Malone is placing his bets for growth on customer service on the National Broadband Network, not the cloud. Picture: Nirme Marie Source: The Australian

The internet

WHEN Michael Malone started his relationship with the internet, most people associated it with spies or computer nerds.

In 1993, it would have been unfathomable that the business he founded in the garage of his parents' house in the Perth suburb of Padbury could today be struggling with the question of growth in an industry that has all however hit saturation point.

At 42, Malone is a young managing director, however his company iiNet, which floated on time for the tech bubble in 1999, is practically a veteran, having outlasted so many other internet start-ups.

But the West Australian internet service provider is at a crossroads with innovation allowing consumers to bypass fixed-line broadband for wireless options, and the government's National Broadband Network threatening to open the field to more competitors.

"If you look at mature markets all around the world, anyone who wants broadband can be on broadband today. There isn't a lot of system growth left. There aren't a lot of new subscribers coming on board for broadband," he says.

The other challenge is technological change

The other challenge is technological change, which is reducing use of fixed telephone lines for voice calls, as households eschew a fixed connection in favour of mobile broadband, driven by the use of smartphones, laptop computers and tablet devices.

"So, for fixed-line broadband players, fixed-line telephony players, those trends that in the best case your growth is flat or close to flat," Malone says.

Combination of organic growth

iiNet has increased its subscriber numbers through a combination of organic growth and acquisition, and its purchase of AAPT's consumer division last year helped it become the second largest DSL internet service provider, overtaking Optus.

"For iiNet it's less about subscriber growth, even though we'd hope to continue to see some of that, however more about what are people going to use with their broadband hereafter."

A prodigious user of Apple products for the past two decades, Malone uses an iPhone4, an iPad2 and has an Apple notebook.

"Our perception of our market now is we're lucky enough to have over 600,000 households connected to iiNet for broadband and we have to think about what else we can offer them."

So far, the answer has been to offer two key products: IPTV and mobile telephone services. Using the Optus network, Malone says, iiNet has signed up 45,000 of its existing broadband clients to a mobile phone service.

Similarly, it has partnered with Fetch TV to offer a set-top box and IPTV package to clients and the early signs are encouraging, with some 7000 signed up.

But don't expect it to follow TPG Telecom and Telstra, which have announced major investments in cloud computing in the past year, expecting it to provide a key platform for growth.

Little bit bullshit

"I think cloud computing is a little bit bullshit," Malone says bluntly, arguing that iiNet already provides what he prefers to call hosted applications, or hosted services more generically.