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Stuff fibre: desperate move, or the system working?

In the space of a few days Fairfax Media found itself in court with Sky over fair use rights for the Olympics, and its parents over the ditch announced a loss of almost $1 billion and said it was likely to reduce the print editions of The Sydney Morning Herald and other Aussie papers. Meanwhile, the Commerce Commission is still brooding on the implications of the proposed merger with NZME here in New Zealand.

Not a lot on there then.

So why not mix it up a bit by starting up a fibre-only retail service provider too? And so on a frosty Tuesday morning, Fairfax Media announced the launch of Stuff Fibre to an equally frosty reception from many in the telco industry.

The usual suspects jumped on Twitter to decry the obvious insanity of such a move, and you might be forgiven for thinking that Fairfax had made the Worst Business Decision Ever. But scratch the surface and it doesn’t look quite so barking.

For a start, Stuff Fibre is a joint venture, with some serious telco knowledge being brought to the table by a team of ex-Vodafone folk. You’d have to assume they would have some sense of the economics and technology involved with running an RSP and still think they can turn a buck.

Then there’s the fact that content and connectivity is consolidating all over the place – the potential Voda-Sky behemoth being the prime example here in New Zealand. But it’s hardly a new model, as cable TV providers the world over will tell you. Or Spark, with Lightbox, for that matter.

Then there’s the issue of ease of entry, a sign that the wholesale broadband market is working properly. If new entrants from adjacent industries, such as Trustpower and Stuff Fibre, are joining international RSPs like MyRepublic in starting RSPs in New Zealand, it probably says there’s money to be made from the right business model and the barriers to entry aren’t what they used to be. And, just maybe, the right business model doesn’t have all the legacy cost structures of a traditional telco.

We are all searching for the right evolution to stay relevant and profitable. Simon Tong, CEO of Fairfax, describes Stuff Fibre as an option play – in essence, let’s give it a shot and if it flies we pat ourselves on the back, and if it dies we kill it quickly.

Fairfax is hardly alone in giving new things a shot as revenue from its traditional sources – advertising and subscriptions – dwindles. So maybe we should applaud the move, or at least see how things play out before declaring it the Worst Business Decision Ever.

This story originally appeared on The Download
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