Norfolk Island's Answer to P2P and IGA

Operators of a new interactive betting service based in Norfolk Island are hoping the allure of low margins and the ability to operate out of arm's reach from Australian regulators will make it a major player in the Aussie betting market. AusTOTE was launched this week with plans of being fully operational by the end of the month.

The site offers commission rates as low as 2 percent and gives punters the chance to lay selected horses--two advantages that are typically selling points for betting exchanges.

The first new Australia-licensed TAB in decades (Norfolk is an Australian territory, AusTOTE can offer its Internet-based betting service without violating the Internet Gambling Act (IGA), which is currently under review in Australia.

Norfolk Island has its own gaming commission with rules and regulations separate from those in place in Australia. It has its own parliament, which posses all the necessary powers to legislate and regulate wagering operations.

The timing could be perfect for AusTOTE too, as many state and territory TABs are buying each other up at a rapid pace with the intention of operating as many totalisator systems as possible.

With the blessing of the Norfolk Island Gaming Authority, CEO Mike King and his daughter Amada king obtained a totalisator license in the only Australian jurisdiction without a TAB in place.

The elder King knows a little something about how the island operates; he served as the chief minister from 1994 to 1997. The Norfolk Island Act of 1979, he said, created the groundwork for the island to be a self-governing jurisdiction in many respects, with Australia still having some say in other matters.

Norfolk Island's legislature has numerous powers that can be exercised with no reference to the commonwealth. One of these areas, King said, is gambling.

Ironically, it was the commonwealth government's desire to prohibit online gambling that fueled the Norfolk Parliament to license AusTOTE. The island considered bringing in online gambling businesses in the late '90s to offset the economy's growing dependence on tourism dollars.

Plans were put on hold after the passage of the IGA (the federal government issued a moratorium on Internet gaming licenses), but the Norfolk Island Parliament used previously passed legislation to move forward with its plans to license the new AusTOTE.

The launch of an Australia-licensed service that offers the same advantages offered by betting exchanges could make things interesting in light of exchange operator Betfair's stronghold in Australia. (The U.K.-based P2P giant has been tried unsuccessfully for two years to obtain a license in Australia.)

Mark Davies, a spokesperson for Betfair, said the introduction of AusTOTE would probably have little effect on Betfair's efforts.

"I don't think it affects our efforts except inasmuch as it brings home the clear point that just stopping us will have no effect at all on the alleged points which the TAB claim are so dear to them," Davies explained.

He added, "The arrival of AusTOTE will bring into perspective the extent to which the TAB's are a commercial battle, which can only be a good thing. It may finally persuade some people who still had a thought that there had to be some logic somewhere in their argument that in fact there isn't any."

Meanwhile, the line between betting exchanges and sports books could become blurred as more and more traditional bookmakers introduce enhancements mirroring those found on exchanges.

"Other operators will offer low margin businesses with greater flexibility than the TAB does," Davies said, "because this is the 21st century and the punter deserves a fair go, which he patently is not getting at the moment.

King said the AusTOTE system was put through rigorous testing by the Norfolk Island Gaming Authority. The totalisator system was developed in house, he said, and is based from a computer complex on the island.

"The software relies on a slick user interface clearly designed with a punter's requirements in mind," King said.

Punters can download the interface from the AusTOTE Web site, which provides real-time odds and processes funds instantly.

Offering only win bets on Australian thoroughbred racing initially, AusTOTE operates seven days a week and is still subject to pre-launch testing by the gaming commission.

Like Betfair, King said, the business plan allows for a low commission rate, which is determined by the punter's betting volume. Starting at 5 percent, the rate can get as low as 2 percent. Punters can also get a discounted rate by placing bets early in the day, thus encouraging a larger pool size early and providing more price stability later in the day.