News

Vizard Agenda Analysed

By Michael Gadiel - Executive Assistant (Industrial)- Labor Council of NSW

With the ACTU executive expected to discuss the Vizard computer proposal this week, Workers Online have sent our spies out looking for details. Here's what we've been able to uncover:

This report is based on information which is publicly available and from discussions with individuals.

1. The basis of the deal is that a subscriber will receive a computer and Internet access for $8 per week.
2. This offer is currently being pitched to unions and community organisations by a company known as Virtual Communities, Chris Clarke, formerly from Pure Media (advertising), is the director of this company.
3. Under the union component of the deal a company called ACTU/Virtual will be established.
4. We understand that ACTU/Virtual will derive its income through commissions from product sales to union members, 35% will be put back into the company for marketing and development, presumably the other 65% will be returned to the parent company Virtual Communities.
5. It is understood that the company will be floated. Direct investors will receive a guaranteed 15% (compound) return on their investment before unions receive any share in equity.
6. From the information we have received it appears that the Union share would be limited to 20% of the value of the remaining equity pool after direct investors have taken their guaranteed 15% return. Unions would share equity, from a total equity pool consisting of 20% of the remainder, in proportion to the value they had brought to the business - through subscribers.
7. Virtual Communities have offered unions the opportunity to make a direct investment with the following conditions:

• Collectively the union movements equity in the venture will be capped at 5%.
• If unions intend to invest - they would be required to provide $500, 000 up-front, within thirty days.
8. It is intended that the parent company will be floated within 18 months to two years from the launch of the deal.

1. It appears unions are being asked to sign up to this deal for a period of five years, during this time Virtual Communities will claim exclusive ecommerce rights to union membership.
2. Virtual Communities requires the right to use of each participating union's name and logo with respect to the deal. In particular this would be used to brand the entry point through which union members access the net.
3. Unions must undertake to promote the deal in their publications.
4. Virtual Communities want to access union membership through mail outs etc.
5. Unions must undertake to pursue payroll deductions for members involved in the deal as well as employer contributions to the scheme.

If unions endorse this deal then they will ultimately be held accountable by their members for the success of the service. Unions should be cautious of entering into a deal in which they have no ownership.

This issue arises particularly with regards to the control, quality and direction of the products and services recommended to union members through the use of their logo on the Virtual Communities Portal.

Without a substantial ownership stake, then regardless of contractual arrangements, unions, if they are unhappy with the tone of the material they are endorsing through the Portal, will have no choice other than to withdraw rights to use their logo. The members who have already accepted the deal may still remain with the Virtual Communities portal/entry point, with, or without a union branding.

Given the rapidly changing/growing nature of the Internet market, five years is a very long time to be locked into an exclusive deal with a single provider. Five years ago, net giants such as Amazon, eBay, Yahoo and Netscape did not exist!

 

Computer Hardware Deal

1. Computer:

• Purchased through IBM
• Intel Celeron 400Mhz
• 15 inch monitor
• 64 MB memory
• 4.2 GB capacity hard drive
• 56k modem
2. Shipped pre-configured for Internet Access & with Lotus Smartsuite
3. Hardware Support will be provided by the Hardware Supplier
4. Computer is financed over 3.5 - 4 years charged at between 7 - 10 per cent interest per annum
5. $10-20 charge for delivery / additional charge for installation

The Celeron 400 is a low cost alternative to the Pentium II/III lines designed for the budget market - however has some technical limitations including the fact that it runs on a 66Mhz motherboard (rather then 100MHz for PII/III) and has only 128kb L2 cache.

These computers will be obsolete by the time they have been fully paid for the current life span of a middle of the range PC is 2 years. Desire for the latest games and software as well as speed on the Internet will drive demand for upgrades.

In the current environment ISP's are desperate to lock-in market share, recently in the US one such company offered free computers to new subscribers.

 

Internet Access

1. Internet access is likely to be through One.Tel, although in media reports this week they have denied that there is a deal in place.
2. Subscribers would receive 15 - 20 hours Internet access per month with additional time charged at 40-50 cents per hour.
3. Support provided through 24 hour ACTU/Virtual Communities support centre.
4. Internet training is included as an optional extra - but will carry an additional charge.

No known guarantees on the level of service that will provided by the Internet Service Provider, e.g. modem to client ratio, speed of connection, connectivity to the Internet or customer support.

This deal does offer cheap access, however the market is growing very rapidly, ISP's are valued on the stock market by the number of subscribers they have, they are prepared to loss lead to establish market share.

For example, it is expected that Microsoft is about to offer free Internet access in the US in an attempt to break AOL's domination of the market. Telcos are starting to bundle Internet access with local phone accounts. In this environment it is very difficult for a particular deal to remain the best deal for very long!

 

Portal

1. Virtual Communities plan to establish an Internet Portal -just like any homepage except it will be designed to be the first point of entry for subscribers to this deal every time they access the web.
2. We understand that by employing special software and configuration users will be required to log onto the Internet through the Virtual Communities portal, it will be impossible to access the Internet without going through the Virtual Communities gateway.
3. It appears that unions will have little control over the content of this portal.
4. Virtual Communities will on-sell/promote products and services through this portal and will receive a commission on sales. These commission will provide Virtual Communities with their primary income stream.
5. Virtual Communities will be responsible for determining which e-commerce providers will be promoted through their portal, however they undertake to be sensitive to union concerns in the negotiation of these arrangements. Organisations offering competing services to industry Superfunds will not be allowed.
6. The browsers on the computers will be pre-configured in such a way that it will be a non-standard procedure for web-users to access non-endorsed web sites - or the Internet at large. This will mimic the branded Microsoft Network model.
7. Virtual Communities Claim that they will "filter" the web and bring only the "best sites to the immediate environment".

The main focus of this deal is the hardware and the Internet access to union members but the real value is in the portal, which will be exclusively controlled by Virtual Communities - in terms of establishing the equity of the company it is the portal that the market place will value.

The primary income stream from the project will derive from commissions associated with product sales through the Virtual Communities portal.

It is important for unions to control the content so that they have the opportunity to organise their members through the Internet - but this will not be the case under the Vizard Proposal.

It is generally agreed that the Microsoft Network model which sought to limit user access outside the confines of a limited set of 'endorsed' sites has been a failure.

It is not possible to ascertain whether Virtual Communities intend to block sites which offer products / services competing with those advertised on the Virtual Communities Portal.

 

Union Web-Sites

1. Virtual Communities will offer unions some form of free web-presence or web-site hosting.
2. At this stage it is not clear what the value of this service will be - however Virtual Communities claim it will be in the tens of thousands.
3. Virtual Communities foreshadow a whole range of services to be offered to union web-sites co-located with them, these include web design, hosting, maintenance, and ongoing improvements.

A reasonably high standard union web site can be built for around $15 thousand and with an ongoing server charge of $12 hundred per annum. In addition, such a website may cost another $2 -5 thousand to per year to maintain and further develop. The value of Virtual Communities 'in kind' returns should be measured against this benchmark.

The standard of the Web-sites offered under this proposal is unknown.

 

Conclusions

1. There are many of these bundled deals being developed and offered - ecommerce providers are desperate to establish market share in this rapidly growing area and will cross subsidise computer purchase and Internet access to build their customer base. A similar situation arose with the very cheap mobile phones bundled with a fixed term network access contract.
2. Virtual Communities has undertaken to put the deal together (hardware plus bundled Internet access) but will gain control over the content of the portal through which our members will access the net.
3. Commissions from sales of products and services sold through this portal will provide Steve Vizard and Virtual Communities with their primary income stream. It is not fully clear, but it seems that any union share must come from the 35% of funds being returned to ACTU/Virtual. A significant proportion of these funds will have to go back into marketing and further web development. Virtual Communities are offering 'in kind' services through hosting of unions Web sites.
4. Unions are not guaranteed to have any share in the equity in Virtual Communities
5. Unions will be delivering the key ingredient in this deal - loyalty - our members will take this deal on the basis that their union is recommending it to them.
6. Under this deal unions could lose control over the bulk of the material that their members will view on the Internet. In the future, this will make it very difficult for unions to use the Internet as a medium to actively organise and expand their membership.
7. This proposal is ultimately geared toward an open float, this could leave control of the union movements presence on the Internet to the vagaries of the sharemarket.

  Tell us what you think of the Vizard Deal

  View entire issue - print all of the articles!

  Issue 27 contents

»	Combet�s Call - Double Effort Needed Now
»	Rally or Surf Party? It�s the Workers� Call
»	Vizard Agenda Analysed
»	Truckies Face Another Oakdale
»	Former Union Leader to Investigate SOCOG Uniforms
»	Second Steggles Mum Wins Job Back
»	Strip Leads to Fair Wear Win
»	Rail Security: Scully Cuts Staff as Assaults Rise
»	Civil Libertarian Support Sought Against "Big Brother"
»	Dita Sari takes Sydney by Storm.

»	Guest Report
»	Sport
»	Trades Hall
»	Piers Watch

»	Thanks for Einstein
»	A Non-Unionist's Sympathy
»	A Mexican on Piers
»	Group Homes Claims Disputed
»	Rallying Cries
»	Security Overload

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