Orcon mystery solved

The mystery of who is buying Orcon has finally been solved with confirmation CallPlus will acquire the internet provider.

As it turns out, the story of who hasn't bought Orcon is more interesting than the one of who has.

The merger of CallPlus and Orcon, the country's third and fourth-largest internet providers, will consolidate the market.

Between them they have about a 15 per cent market share, behind Telecom and Vodafone. Christchurch's Snap Internet will move up the ranking to fourth place.

CallPlus must be anticipating gaining some economies of scale.

Customers will no doubt have views on the implications for customer service and a myriad of questions about how their plans might be affected but, all up, the takeover will probably generate few ripples.

Had 2degrees bought Orcon as rumoured last month, it would have been genuinely "market changing".

2degrees has signalled its desire to enter the fixed-line broadband market so it can join Telecom and Vodafone in offering fixed and mobile products to customers.

But it appears 2degrees may have made the reasonable call that it is better off starting from scratch in the fixed-line market or partnering with one or more existing providers, perhaps CallPlus and/or Snap, as and when that becomes a priority.

It would have been even more significant if Sky Television had bought Orcon and kept it under its belt as a defensive strategy to encourage other internet providers to treat iSky and its forthcoming subscription video-on-demand service favourably.

It is easy to imagine Sky saying that there would be no competition issues in the company owning an ISP as it would treat it and other ISPs even-handedly - they would all be free to provide Sky's television content unmetered to consumers.

But it appears the broadcaster never gave any consideration to buying Orcon, choosing instead to keep its eggs in the basket of its partnership with Vodafone.

While the New Zealand pay-television industry remains essentially unregulated and National is riding high in the polls, that is also understandable.

Another market-changing possibility was that a mainstream retailer such as The Warehouse might buy Orcon. Although it appears that was never on the cards, it was not left-field.

Internet access has become a commodity.

In Britain, supermarket chain Tesco is a major internet provider and has also diversified into banking, insurance and a myriad of other sectors. It is not immediately obvious why no mainstream New Zealand retailer has followed suit.

If rumours of Orcon's sale price are correct, director Warren Hurst and his fellow unidentified investors in Orcon have got out of the business with their shirts intact.

There may be more to come out about why they bought the business off Kordia last year for about $38 million in the first place, and why it failed to live up to their expectations.