Internode will launch domestic video-on-demand services early next year. In addition the ISP is finalising its plans to join the heating-up Voice over Internet Protocol (VoIP) market this April.

Speaking with ZDNet Australia  this morning, Internode managing director Simon Hackett said that his company's implementation of an ADSL2 broadband service would allow it to not only better compete with Telstra in the telecommunications space, but also in the home entertainment sphere that is dominated by the free-to-air and Pay TV giants.

According to Hackett, his company's rollout of 'video-capable DSLAMs' in Sydney, Melbourne, Adelaide and Brisbane over the next six months will mean that a 24Mbit/s ADSL2 connection can be carved up so that "it's not video running over your Internet service".

"We'll be selling a set-top box," said Hackett, "that you can bang on top of your TV. That is, it will be just TV over your phone line, and is independent of your broadband. You can even order it without a broadband service."

The technology will split multiple 4Mbit/s HTTP channels off from a 24Mbit/s ADSL2 connections, one channel for each television set. According to Hackett, the technology is entirely different from the traditional cable TV provided by vendors like Optus. "Cable TV is really a shared antenna, with all of the channels going past at once. In this case, when you use a set-top box with an ADSL system, when you hit a different channel on the remote it actually changes what it's sending you - so you don't need bandwidth for all the channels, you only need enough for one or two TVs," said Hackett.

Hackett cited the example of Fastweb, a company which provides similar services to the Italian market. He said that 20 percent of Fastweb's customers don't actually subscribe to broadband Internet - they simply pay for the video-on-demand service to their TV. "The TV is so clear it's indistinguishable from any other provider," claimed Hackett.

But the real battle for Internode will be getting the content to distribute through their new medium. Although Hackett said his company can obviously do hundreds of channels of straight television such as free-to-air television or satellite-sourced content, he also said this sort of content might be cheap but not compelling for consumers. "The real deal is to do deals with the major content providers for real movies," said Hackett.

And Internode is working on that. Hackett said his company was in negotiation with a few content providers at the moment, with the 'unsurprising' one being Transact Communications, who have for some years offered a video-on-demand service to Canberra. Hackett says Transact "has a very tested business model but are land-locked to Canberra". That distribution problem, said Hackett, could be solved by Internode, who "already has a POP [point of presence] in Transact's machine room".

Hackett said he was hopeful that his company would have a content deal worked out in a few months, although Internode was currently doing experiments with internally-filled content that "worked fine". However Internode might need to hurry; Hackett said Transact was "talking to everyone who's building their own DSLAMs", adding that this was no surprise.

With regards to Internode's VoIP service, it is currently in beta testing and will be launched in April of this year. The service "works OK on Telstra gear and works brilliantly on ours," according to Hackett, so "we can guarantee the Quality of Service". Hackett agrees with industry analysts that this year is the year for VoIP services to hit Australia in a big way.

While Telstra is itself trialling its own VoIP services, Hackett says the Telstra model of providing VoIP services as a second line is a transparent business ploy to save the revenue generated by Telstra's existing fixed Public Switched Telephony Network (PSTN) services.

"They'll compete on this by just dropping the price [of their PSTN services] when they start hurting enough - in about a year," said Hackett. He pointed to the example of the VoIP market in the United States where the major telecommunications giants dropped their prices to match VoIP provider Vonage's 'all you can eat' plan.

Internode will not force its customers to use certain hardware for its VoIP services. Hackett said in a post on broadband news site Whirlpool that his company "will be recommending hardware that lets you use the one phone, seamlessly, for VoIP and PSTN (bidirectionally)." The Internode managing director believes that "Having to buy extra phones to use VoIP for local calls makes it even less viable."

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