Telecom’s Xtra agony

The speeches were imminent — but the Telecom board members, industry luminaries and media folk found themselves trailing down the stairs at Auckland’s Kermadec restaurant and out to mill about in the downtown air.

The evening eventually recovered from its hiatus, and Xtra, Telecom’s much-anticipated Internet service provider, was duly unveiled. But the pleasant evening of May 1 1996 was not the last of the alarms for Xtra.

The most recent came in July of this year, when, as Xtra remained tight-lipped on an internal restructuring, both the Dominion and National Business Review predicted that up to 85% of staff would be sacked in order to stem constant financial losses. No one save Telecom can quantify the losses. One estimate puts Xtra at the end of its first year collecting only $20 million, a short-fall of $40 million. Telecom won’t comment.

As it happened, there was no purge — only 15 of 150 staff were made redundant.

But why was Xtra, the country’s largest Internet provider, with all the advantages of being owned by Telecom — not to mention an empire-sized founding vision — seen to be downsizing at all? Why on earth can’t Telecom make money out of the Internet?

Firstly, Telecom does make money out of the Internet. Lots of it. The data business, which Telecom virtually owns, has boomed as more business customers ramp up their Internet needs with leased lines and ISDN. Most home Internet users cannot afford that, but many have paid for a second residential connection.

Even Telecom’s wholesale business in international Internet bandwidth has staged a startling revival this year, winning back business from the interlopers Telstra and Clear.

Xtra has arguably been the biggest success of all. It has opened nearly 150,000 accounts in two-and-a-half years. It virtually invented mass-market Internet service in New Zealand.

Yet, after 30 tumultuous months, Xtra still isn’t quite right. Analysts still doubt it’s making money. It’s still annoying potential business partners like TVNZ, by failing to deliver on promises. And it’s still viewed with suspicion by those who could be its closest pals.

All in all, Xtra is a painful lesson in Internet business. Telecom is only now getting it right.

Here’s how.

Going back to the garage

Three years ago, you’d find plenty of people telling you that Telecom didn’t understand the Internet. A model of corporate culture, it was caught off balance by a phenomenon rushing from the fringe. Its ridiculous home shopping trial with the ASB (depending on special phones costing $1000 each) did not even use the Internet.

Its only venture into online service, a joint venture with Taranaki Polytechnic called New Zealand Online, had been trounced by the first flock of small-time commercial ISPs (Internet Service Providers), already starting to win the corporate business Telecom prized.

These small ISPs — one step up from the garage — were onselling international Internet bandwidth provided by the Telecom subsidiary Netway, with Waikato University as the intermediary. Telecom announced in September 1994 that Netway itself would start providing retail Internet service to its existing customers.

Netway never launched its service. Instead, in early 1995, Telecom Online Services (TOLS) was born. TOLS, more of a research group than a business unit, conducted service trials and, says its then business development manager, Phil Norman, came up with a very different business strategy.

“I supported the idea that a venture of this kind, which was quite different to Telecom’s mainstream business, would prosper if it was allowed some freedom to grow quickly, make decisions quickly, act entrepreneurially in a market which was characterised by very rapid growth,” says Norman.

“Then, over time, certain services should be pulled back into the mainstream organisation because of the tremendous ability that Telecom has to have contact with just about every New Zealander.”

Norman admits the Internet was a hard sell to some “sceptical” people in Telecom, but scoping studies gave way to technical trials and discreet recruitment, including some of the first wave of local Web publishers. Telecom, having sailed into the media business with a plan to provide programming over a new domestic cable network, wanted an Internet publishing business too.

A yen for content seemed quite logical back then. The local online market was dominated by CompuServe, which sold its customers not just connectivity but exclusive content and services. Elsewhere, America Online’s stock was rocketing and Apple Computer had its eWorld service. Most of all, Microsoft had positioned its own online service, Microsoft Network (MSN), as a key part of Windows 95.

But eWorld died, CompuServe was split up and sold last year and Microsoft has spent three years getting the hell out of its original MSN strategy. Maybe content wasn’t such a great idea after all.

Enter the American

When Chris Tyler arrived in December 1995 to become general manager of Internet Services Group (or ISG, as Xtra is internally known) he brought a style not seen before at Telecom.

A breezy, talkative American in his 30s, Tyler had been “subject matter expert” for the Internet and multimedia at EDS Management Consulting Services at AT Kearney, and CEO at two American software companies. He reportedly caught the eye of Roderick Deane.

To distance his project from Telecom, Tyler declared Xtra’s office a necktie-free zone, enforced with a ceremonial pair of shears. Staff were encouraged to dress as if this were a Silicon Valley start-up, not the offspring of a large and somewhat uptight corporation.

Tyler was, by one account “very good at motivating staff. He talked and talked and you couldn’t help but believe him — and you couldn’t help but like him. I can see why Telecom got him on board because he obviously knew what he was talking about.”

Tyler also, says a founding staffer, “had this vision that we were going to own the Web and we were going to tie up every Internet user.”

Tyler got closer to that wish than he possibly expected — but he was also at the helm for some memorable misfires.

Misfire one

One of Tyler’s first acts was to hire, then acquire (although it is unclear whether money changed hands), the Brisbane-based multimedia company Digital Video Productions (DVP), to create Xtra’s branding and design a Web presence around it.

Tyler praised DVP, depicting it as the core of a new media business soon to employ hundreds of skilled staff. It was the first sign that Tyler’s technical grasp of the Internet was not up to scratch.

DVP’s “X-ville” image — a town built around an X-shaped junction — was a shameless knock-off of the interface for Apple’s eWorld. It is attractive and still serves Xtra well on the sides of buses, but has been a curse as a default Internet home page from the day it launched.

At 135Kb, X-ville was enormous at a time when most people still used 14.4kbit/s modems and some even paid for local data traffic. It only worked for people using the then-new Netscape 2.0 browser. And, most importantly, it was to become a great, dark wall between Internet users and the content Xtra so desperately wanted to show them.

Neither X-ville, nor the three alternative “navigations” DVP hurriedly provided for low-bandwidth or impatient users, could change from day to day. The visitor had to click through to one of the specified sections, then click again, to see any content at all, and there was no way of showing off a new feature on the top page. It just didn’t work.

Misfire two and three

DVP entered the frame through its relationship with another Telecom Australian asset, the IT and telecommunications company Pacific Star. They made quite a pair. PacStar designed and installed the billing and security system behind Xtra, an infrastructure that Tyler told the press would be good for the first 50,000 customers.

But the PacStar system started double and triple-billing customers, or not billing them at all. Billing records got so out of hand some were simply dumped. Almost every other ISP had billing problems at the time, but Telecom had been expected to get it right.

Within six months, PacStar’s system was replaced, at considerable expense, by Technology Applications’ IPAC 9000 — a turnkey solution from the US.

“The PacStar solution wasn’t a good one,” Norman says. “But I think you also have to be fair to the management team. Billing options for ISPs were virtually non-existent at the time. It’s only in much more recent times that packaged solutions have evolved. There was genuine effort made to cast around the world marketplace for suitable options, but there was simply nothing much around.”

The double-billing was nothing, however, in comparison to the great Xtra security debacle, an episode in New Zealand’s Internet story from which nobody emerges with much credit.

It began with John O’Hara, the general manager of Voyager, the 80% Australian-owned ISP.

O’Hara got a phone call from someone at another ISP who said he could access the email of any Xtra customer. O’Hara and his partner Alistair Stevens drove to the man’s home to witness a startling security flaw.

On registration, all Xtra customers

were able to choose their own “Xtra ID”

to be used in their email address — jack@xtra.co.nz. The name was an alias for a numerical log-in the PacStar system assigned to new customers, along with a password.

O’Hara’s informant discovered that the letters in Xtra’s passwords directly corresponded to the numbers in its log-ins — for example, the password for xtr188772 was wppqqv. By any security standard, it was pathetic.

“The ISPANZ steering group talked by phone and decided to advise Xtra ASAP,” says O’Hara. “We called and Chris would not take the call. We then faxed them and asked for a response within 30 minutes. There was no reply so we went public with the fact it could be done but did not say how.”

To discover passwords, it was necessary to know a customer’s Xtra log-in, and not just an email address. There would have been no practical way of finding log-ins had not Xtra inexplicably left open an old Internet utility on its system called “Finger”. The way Xtra’s system was set up meant that anyone who ran Finger on an Xtra email address, would be provided with that customer’s numerical Xtra log-in — and vice versa.

Xtra management went into panic mode, shutting the service down, without telling staff what was wrong. Customers were offered the chance to change their passwords online without being told their security might already have been compromised. Indeed, a malicious attacker could have used the facility to lock people out of their accounts by changing their passwords. Within days, Xtra had couriered new registration packs to 10,000 customers.

Yet a press release headed “Telecom rejects anti-Xtra lobby claims”, insisted “the fact of the matter is that Xtra’s security procedures are robust”. The press were directed to a security consultant who declared Xtra’s system to be sufficiently robust. He later admitted he had been unaware of the problem at the time he was quoted.

A cheeky move

Meanwhile, Voyager staff had done more than Finger one or two addresses. They identified every possible Xtra ID between xtr000001 and xtr999999 — thus compiling an email database of all Xtra customers. O’Hara emailed every one, offering information about the security gaffe and the chance to transfer to Voyager.

It was an unacceptable act of spamming, and even industry body ISPANZ issued a public rebuke. Xtra might have enjoyed the moral high ground for a little longer, had not Tyler returned from a sales tour to the US.

Confusion gave way to rage.

Tyler issued a press release headed “Voyager nabbed!” and demanded that Voyager destroy its database. Then, without warning, he ordered all traffic between Xtra and Voyager blocked — and to hell with Xtra customers who might have been waiting for email from friends at Voyager. It was Internet heresy.

“I would say that I am absolutely surprised and disappointed in the way that the media have worked very hard to try and turn this into an Oprah Winfrey-type event,” Tyler whinged to Computerworld shortly after the block was lifted, insisting the security problem was “a tremendously overblown identification of a weakness that we had in the service”.

Suspicion of the press and a hatred of O’Hara had become something of a culture at Xtra, says a staff member.

“Whenever anything came out in the press bagging Xtra, it was just down-tools and how the hell do we counter this. But they never seemed to take advice on board. It was ‘we’ll do it our way and destroy the bastards’.”

Internet commentator Bruce Simpson, a persistent critic of Xtra, was brought on board to provide a computer industry news feed.

“It was our way of shutting him up,” says the staffer.

Xtra had also inherited from Telecom a strict corporate information policy forbidding staff from talking to the press, even casually. This might have been an appropriate strategy for a big, hard-nosed service business, but it was a wretched one for a so-called start-up, especially one with media pretensions.

Communications staff did their best, but it was clear that Xtra had not moved nearly as far from the mothership as its management liked to think.

Death threats

O’Hara, on the other hand, maintained a good relationship with the press, even after a number of critical stories about Voyager. He had dropped enough hints about the security gaffe for journalists to piece together the story. This made him all the more reviled at Xtra.

Too much so, as it happened.

In the wake of the Finger furore, a young and over-emotional Xtra employee made threats to O’Hara and his family by phone and email.

The man was interviewed and warned by police, but Xtra insisted no wrong had been done. Tyler told Computerworld the employee was “a particularly high-quality human being”. The same man proved also to have posted abusive messages to chat channels while posing as an IDG (publisher of Computer-world and PC World) staff member.

O’Hara, who has since left the Internet business to work for software exporter WEL Technology, says Tyler’s “main problem was that he was too aggressive and approached the market in a very confrontational fashion, which was not required, and polarised the other ISP’s against him. His approach did him more harm than good.”

Telecom faults

So aggressive was Xtra’s drive to build its customer base that Tyler reportedly considered buying out other ISPs, at the rate of $200 per customer.

But serious problems with Telecom’s network meant Xtra was adding customers it could not service. All Xtra and most Ihug customers were by mid-96 dialling in not to the old banks of modems, but a new product, the Ascend Max 4000 hub.

The “Max boxes” connected to exchanges via primary-rate ISDN circuits rather than conventional analogue phone lines, and within three months they wrought chaos on Telecom’s network.

Planners had not provided for such a demand for digital services (although Ihug’s Nick Wood claims to have warned Telecom of the deluge) and by September just two ISPs — Ihug and Xtra — had booked all new ISDN lines out of Auckland’s Mayoral Drive Exchange until the following March. Neither ISP could add enough dial-in lines to keep pace with customer growth.

But there was more. A bug in Telecom’s exchange switches meant only 30 lines could be assigned to any dial-in number. Both ISPs, who were running hundreds of lines, had to issue dozens of different numbers to customers. Customers at Xtra, who got their numbers preconfigured in set-up packs, got busy tones for hours, while lines on other numbers were idle.

It was a shambles. Ihug briefly stopped accepting new accounts. Xtra briefly stopped advertising. (see How they saved the network, page 53.)

Misfire four

Meanwhile, Xtra’s decision to get in the media business was creating its own problems. By hiring Auckland journalist Nigel Horrocks as “mananging editor” Xtra seemed to be signalling its movement into the content business, despite assurances before the launch from Tyler that “Xtra would not be a content provider per se”. These mixed signals were worrying to potential business partners like The NBR. From mid-1995 Telecom staff had extensive discussions with NBR. It was widely anticipated that Telecom would go for the business Internet market, and the two seemed a perfect fit. Eventually, according to The NBR’s Graeme Colman, Telecom “couldn’t get the price right”, and the job of creating NBR’s online presence went to Clearfield (now Clearview) Communications.

In the end the threat of Xtra as a content provider never really eventuated. Horrock’s role was marginalised, with content officially controlled by publishing manager David Maire, who had entrepreneurial skills but no media experience.

And the realities of the media business soon struck home. The site did not attract a profitable level of advertising.

And Xtra’s young content team must have wept as Clear Net’s Web site, a nicely-done bunch of links created by the Hamilton firm Webmasters, won plaudits and awards on its December launch. Xtra’s site had far more substance — but all of it was obscured behind the dread dark wall of X-ville.

The content team won a small victory late in 1997, convincing its management to shrink X-ville a little, leaving a border for links to Xtra’s dozen content “channels”, themselves an initiative by Maire to predigest the growing Xtra site for potential advertisers and sponsors.

Says Norman: “My view is that Xtra prob-ably hadn’t worked out what it wanted to be with respect to content provision. Was it a content aggregator, was it in the business of creating content itself? Did it just edit content?

“And while there was that ambivalence, I think there was an inevitable suspicion in the part of those with content for sale — par-ticularly media interests — as to whether or not Telecom Xtra was friend or foe. And I think to some extent that situation still exists.”

Eventually Xtra made progress in bringing the advertising industry online. Chantal Dunbar was brought from ACP in a sales role and AGB McNair was hired to conduct New Zealand’s first Web site audit. McNair measured daily visits to the Xtra site at 17,491, making it apparently the most-visited site in Australasia. But was the site’s content driving those results or was it the inevitable result of the site being the homepage of hundreds of thousands of users?

Despite the fact the Xtra site probably reaps more advertising revenue than any other in the country, the basic problem remains: If Xtra is in the media business its “content” remains locked up behind a top page which flouts almost every element of Web publishing wisdom. If it is a portal site, the same criticism holds true.

Meet the new boss

By the end of March 1997, Tyler had gone. Less than a year after Xtra’s launch, he left to head Solution 6, an Australian software and accountancy firm which owned its own loss-making Internet service, AccessOne. Tyler’s marketing manager, Bryan Rowe, and his electronic commerce manager, followed him to his new company. Horrocks and Xtra IT manager Tony Reeves also departed.

Tyler’s replacement, and the incumbent, Bob Smith, came from Telecom information services. He’d also run sales and service centres as director of Telecom operations for Auckland. Physically and perhaps philosophically reminiscent of Bill Birch, he was of a different mould to Tyler.

Smith quickly declared an end to two of Tyler’s pet projects. The first, a plan to package up Xtra as an ISP-in-a-box for other telcos, had occupied a lot of Tyler’s time and appealed to Deane, who espoused the idea of “franchising” Xtra internationally. But with a failed billing system and a poor technical record, Xtra really had nothing to sell.

The second was the “media engine”, an idea even Tyler’s staff never understood.

Declaring “a focus on products and processes”, Smith reworked Xtra into “three key business divisions” — electronic commerce, communications and publishing.

E-commerce was put in the hands of Nevin Grieve, a veteran of the NZ Online days, who improved Xtra’s lacklustre Internet shopping story. Buyline, a credit card authorisation scheme with the Bank of New Zealand, and Intershop, a German-developed Web shopping system were bundled into a Xtra Business Builder, a package that, for almost the first time, made Xtra attractive to third-party Web developers.

Under Peter Hutterli, the access business finally started to provide the leased-line services business customers wanted, and consumers were offered new prepaid “advance” rates. This helped stem a flow of customers to flat-rate ISPs such as Ihug — and provided reliable monthly cash flow.

Smith also fixed a glaring problem area — Xtra’s telephone helpdesk — by spinning it off to the call centre specialist Teletech. Helpdesk performance had, in truth, been a victim of Xtra’s technical problems, but the outsourcing worked. Quality has improved and Xtra has a significant problem out of its hair.

Smith’s IS background also helped shape Xtra Business Network, a system of approved service providers based on the channel model common throughout the IT industry. Internet was, he declared at the launch of Xtra Business Network, “just another service business”.

Just another what?

Under Smith, Xtra has moved back towards a Telecom culture. Ties are no longer lopped off at the door. As customer growth has settled down to a steady 10,000 or so a month, the business has stabilised. The bold little startup is no longer.

Restructure

Xtra’s content business still wasn’t scoring any hits, but seemed to settle into a groove. Tele-com communications staffer Quentin Bright moved over this year to manage a new community initiative based around the Auckland Live, the first of many planned regional sites.

Bright brought media experience and did what Xtra had failed to do for so long — making small but significant partnerships — with Peter Fowler’s Newsroom, for political coverage, and the street mag Lava, for local entertainment listings.

Yet all was not well. There was a power struggle between publishing and marketing — read Maire and marketing manager Ian Scherger, who joined in August last year. It was settled this July, when staff were told there would be changes — and redundancies. Maire was among a batch of managers told immediately that their jobs would not exist and is now working for Tyler at Solution 6.

The restructuring was messy. Somebody — possibly one of the sacked managers — sent anonymous email to Internet news services attacking “Ratty” (Scherger) and “Moley” (Smith) and claiming Xtra would be absorbed by Telecom Directories, or back into Telecom proper. Eventually, most staff were assigned new roles and casualties were relatively light, but Xtra’s prospective and current partners had to endure a good two months of radio silence before the air cleared.

Happy ship?

Scherger, whose marketing group now embraces Xtra’s content team, says Xtra is a happier, “more focused” ship now. He denies the restructuring bringing Xtra under the control of Telecom Services was prompted by concern about Xtra’s financial losses.

“It was an initiative driven by our own desire to keep our business model aligned to our core strategies and to keep the resources aligned to the areas that needed them most.”

Financially, he says, “we’ve got strong economic models now which are supporting our expansion into new markets.”

Bright is now content manager and his community team has survived. Some content options rejected under Maire are being revisited. There are even rumours that X-ville will be bulldozed.

But some of the old squeamishness about the media business apparently remains.

“I would tend to call it content rather than media,” says Scherger. “We’re not a media company, but content is an important part of the Internet experience. Our role within content is to organise, syndicate, aggregate what we call compelling, relevant, required local content — and then provide the best gateways to the global content.

“And a lot of that’s going to involve partners, as opposed to us replicating the existing media structures that exist both locally and globally.”

Xtra’s image as a media partner could still do with some buffing up. TVNZ has waited all year for progress on a proposed joint America’s Cup Web site — only to find Xtra has put up its own Cup site. No direction has emerged either from discussions over Xtra’s possible part in Microsoft’s local MSN Web portal. (see Gates pumps up, page 75)

Xtra still struggles to decide who it will partner, and whether to do so at all. Many feel it still does not pull its weight as a citizen of the New Zealand Internet community. As the retail wing of the industry’s dominant wholesaler it will always be regarded with suspicion by its peers.

Telecom got into the Internet because it was a threat.

That threat has become its greatest opportunity. And that’s probably the biggest lesson of all.

Don’t do this

The story of Xtra’s subsidiary, Digital Video Productions, is a lesson in poor partnerships.

While Xtra’s designers were quietly finding ways to work around DVP’s original X-ville design, the Brisbane-based subsidiary began touting for local business, recommending an “initial budget range” of $95,000 to $295,000 for corporate Web sites. It was pricey.

The company bid for the job creating Yellow Pages Online, but according to a Telecom Directories manager, “they had no idea of how little they knew” and the job eventually went to Webmasters. Another job, for Tourism Auckland, was never completed.

DVP was then directed to Wilson and Horton to create a corporate Web site as part of Xtra and W&H’s “strategic alliance”. Knowingly or not, Telecom sold a pup to its most important media partner.

By July 1997, every element of the job had been taken away from DVP and given to other firms. W&H IT manager Tim Barrable told Computerworld that his company was “still reeling from the repercussions” of DVP’s “poor quality work”. Since then, W&H has left behind its alliance and begun developing its own Internet presence.

DVP, once the key to Tyler’s would-be media empire, was passed back to its management in September 1997. By that time, it had acquired a new name inside Telecom: “DDT”.

Do this

Walk first, then run

Xtra was devoting time and energy to grand, global projects — the ISP-in-a-box, the “media engine” and online EFTPOS (apparently) — before it had anywhere near mastered its core business — connecting members of the public to the Internet. Even now, other companies jump in with grand plans for Web sites that don’t work properly.

It’s a communications business ...

Xtra launched with a general manager who barely spoke the same language as his peers, and policies that effectively ruined the kind of relationships making the Internet work. Xtra’s we’ll-own-the-lot approach to negotiation has blown a number of fruitful business deals. Things have improved, but not that much.

Listen to the young folk: They know

A flood of young talent has come through the doors at Xtra. Unfortunately, much of it washed right out again, under-appreciated and poorly supported. In a frontier industry senior management does well to listen to new talent — it has its ear to the ground.

Keep a fresh face

Exactly what is it that keeps the world’s most dysfunctional home page truckin’ on? We don’t know, but we’d guess it’s been a triumph of the marketing department over common Web sense. While most major home pages ripple with daily, weekly and monthly changes, every day is the same in X-ville.

Cashflow, cashflow, cashflow

This is one lesson Xtra has learned, but its no-standing-charge fee structure still leaves it supporting a whole lot of customers who don’t regularly spend money. Expect to see monthly “advance” rates become the rule because as well as helping cash flow, the punters want them too. And while Xtra was busy carpet-bombing all those consumers with CDs, little companies like Iconz and Netlink picked up profitable accounts like NZ Post.

Don’t worry, be happy

Jeff White, Telecom’s financial controller was quoted in the Christchurch Press in October 1996 saying Xtra wasn’t expected to be profitable until 1999. So why worry now? If it’s an Internet content business anywhere in the world, it’s probably burning money. And, like America Online, which suffered similar technical problems, Xtra is also through that troublesome period of explosive growth. Just relax and try not to spend too much.

How they saved the network

So, it’s 1996 and your retail Internet business is adding more customers than it can possibly serve, all the other retail Internet businesses hate you and your network is crumpling under the strain. What do you do? Telecom’s then newly-appointed marketing manager for computer communications (and now manager for future technologies) Graeme Rowe got busy.

“All those ISP guys had the year before been in garages with 10 telephone lines, so the basics weren’t even there. We were copping a lot of flak in the press. Most of it was relationship-driven, and most of it was driven by the aggressive attitude - or the high-growth strategies that ISG was preparing at the time.

“We didn’t have the right relationships with the ISPs, we weren’t supporting them technically, we didn’t have the right sort of infrastructure, there were credit management issues galore … so we had to change to adapt to the situation.

“We had objectives in terms of high-performing networks, high percentages of customers connected, trying to reduce the geographic barriers to connecting. We set up structures and processes to deal with the ISPs as true and valued customers in their own right - whereas before we’d treated them as a few of the thousands small businesses. We moved them into the corporate business where we got the technical resources to help them.”

On IPNet, the nationwide Internet Protocol platform that saved the voice network and set Telecom on its Internet-friendly course:

“IP is the network now. The platform itself has potential to do all sorts of things – it’s going to be dial-up, ISDN, ADSL, VDSL, HDSL, wireless, satellites, paper cups and string if it works. That’s what IP is going to be - not any one thing. I can honestly say most of our objectives have been met. We have the best Internet in the world. The network here of any ISP here is significantly better than any you’ll get in the USA. We have higher penetration and getting busy tones on dial-ups is rare.”

Cheaper? Faster?

“As soon as we possibly can. We’re not being reticent about it, we’re not going to be slow about it. As soon as opportunities come up, we intend to capitalise. You’ve seen our vision statement. We have very strong Internet thinking at the executive level that’s rippling down throughout the company.”

Timeline

June 1994

In a joint venture with Taranaki Polytechnic, Telecom launches a cut-down Internet access product for schools and other special interest groups, called NZ Online.

September Telecom’s Netway Communications announces that a retail ISP service for corporate customers will launch in six months’ time. It doesn’t.

January 1995

Microsoft CEO Bill Gates talks with Telecom about a joint venture with Microsoft Network. Unlike Telstra and Japan’s NTT, Telecom says no thanks.

November 1995

Voyager opens for business, charging $10 an hour and launching the first 0800 toll-free service. The Internet Group (Ihug) launches New Zealand’s first flat-rate Internet service.

December Chris Tyler arrives. Clear signs a non-binding letter of intent to extend US ISP PSINet’s network New Zealand.

January 1996

Waikato University’s NZGate stops reselling international Internet bandwidth from Netway, opening up the wholesale bandwidth market to Clear and later Telstra. Tyler hires DVP.

February Commerce Commission rejects a complaint from Voyager and Web World that Netway is selling bandwidth cheaper to TOLS than to other ISPs.

May 1996

TOLS goes live and becomes Xtra. Voyager halves its hourly rate to $5. Tyler talks up IP telephony as “a very real application for the Internet.”

June Tyler says Xtra is “three months away from Eft-Pos, from direct debit out of the bank account. We’re very focused on getting that done.” (It still hasn’t happened, and isn’t likely to.)

August 1996

Xtra halves hourly rates to $2.50 — and, more controversially, 0800 rates to $4.95. The $2.45 an hour premium for 0800 access is a lower rate than any other Telecom business customer can get. September Commerce Commission agrees to investigate complaints against Xtra from Voyager and others. 10,000 Xtra customers.

October 1996

Tyler travels to the US to pitch Xtra’s “value-added Internet architecture” to telcos. The Xtra password fiasco kindles the “ISP Wars”. Telecom’s plans for a national IP network are rumoured.

November Clear Communications, having ditched its PSINet plan, launches Clear Net. NBR Online opens.

January 1997

IPNet officially announced. Telecom sues IDG.

March After reportedly being carpeted by Telecom board over Xtra’s bad publicity and financial losses, Tyler leaves to become CEO of Solution 6. 45,000 Xtra customers.

April Bob Smith appointed general manager of ISG.

May Smith signals new focus on business market.

July 1997

Xtra helpdesk staff told to reapply for their jobs with call centre specialist Teletech.

August Ian Scherger joins Xtra as marketing manager.

September A site redesign sees the X-ville graphic shrink but not disappear. Xtra joins NZ Herald and others as providers of Microsoft ‘Active Channels’. 74,300 Xtra customers.

February 1998

Xtra enters travel business, partnering with nine other companies to launch Xtra Travel Club. 99,315 Xtra customers.

May — Xtra’s IP telephony trial with VocalTec has been a failure. Xtra takes up BNZ Buyline service and launches Xtra Business Builder. Xtra loses MetService as a customer after service failures.

June 1998

Xtra unveils Auckland Live, the first of a planned network of online “villages”. 119,400 Xtra customers.

July 1998

Wilson and Horton outlines a long-term Internet strategy – which does not include its “strategic partner”, Xtra. Smith announces “refocusing” of Xtra business, with media sales to become part of the marketing division, and content be integrated into marketing and access divisions. Several managers are made redundant.