Coming Of Age: It Only Gets Tougher For The ISP
By Tom Steinert-Threlkeld
Schopenhauer, the German philosopher, figured only change was eternal, perpetual, immortal.
If he'd lived long enough (another 137 years) to become an Internet service provider, he might have added "unrelenting" and "overwhelming" to the list.
Consider this: Only five years ago, 992,000 host computers and just 6,560 networks were part of the Internet. Now, as 1997 winds down, there are nearly 20 million hosts and more than 1.3 million networks.
Indeed, you'd be hard-pressed to find any business in the history of the world's economy with the kind of growth rates that ISPs both enjoy and confront.
The Internet access business is one that regularly reports 24.9 percent gains in revenue. But unlike other industries, the benchmark period is not the year; it's every month.
Astounding as that may seem, it is regularly documented by Maloff Group International. Indeed, in the past five years, there's been only one brief respite when growth rates went down to a mere 3.8 percent per month - or, 56.4 percent per year.
Now, this industry is plugging away at its more "typical" 25 percent per month clip. It's now running at a rate of $8.4 billion a year. And, with a little faith in the power of extrapolation, it should hit $50 billion by the end of the year 2000. Not bad for what was just a $491 million per year business at the outset of 1995.
So it's little wonder that WorldCom Inc. is willing to pay a record price for MCI Communications Corp. There's gold in them thar Internet backbones. Indeed, much of this pie is going to go to the biggest players. Even though there may be 4,500 different ISPs running around trying to pick up business and consumer accounts, the top 10 - led by folks like America Online Inc. and IBM Corp. - account for 70 percent of the revenue.
And, if anything, it seems like it's getting harder to make a buck, if you don't follow WorldCom's lead and focus on corporate customers who are willing to pay reasonable prices for Internet services. Used to be, in the "early days," that you could charge $1 or $2 per hour for use of the Internet. The meter always ticked.
Now, $20 a month for unlimited usage is de rigueur, thanks to folks like Sky Dayton at EarthLink Network Inc. and the unknown suits at AT&T WorldNet. And it's going to get worse. Who's ready to compete now with the likes of Ted Waitt and his highly mo-tivated crew at Gateway 2000 Inc.? They're lowering the boom to $12.95. Betting against him is not usually a good idea.
Ah, yes. Let's just soak in those good old days, when the road to riches meant signing up a few thousand subscribers, finding a good banker, going public and making a mint. Now, the road to riches means signing up a few thousand subscribers, finding a good banker and selling out.
For those hardy souls who want to stay independent, the challenge increasingly will be to find ways to control the account. For some, it will mean hosting core business applications on site. For others, it will be providing unmatched customer service. For others, it will be finding ways to deploy reliable, high-speed networks at below-market rates.
But it isn't going to be easy. An ISP is damned if it builds extra capacity and damned if it doesn't. Brownouts and blackouts are going to be a fact of life, as Internet providers herkily-jerkily respond to the hard-to-believe growth rates that seem unsustainable. What kind of confidence is required for a sane engineer to persistently ask senior management to build more capacity on an expectation of 25 percent per month growth? Yet, if you ask for something reasonable, like, say, 10 percent growth, you've missed the mark by more than half.
So it goes. As TCG Cerfnet Executive Vice President Pushpendra Mohta points out, even if you want to add capacity, you may not be able to get it. For now, there are bandwidth constraints, although start-ups like Qwest Communications International Inc. figure they'll put an end to that, with a fiber network that it claims will sport six times the capacity of all of today's backbones. And there are hardware constraints, with production routers, Mohta reminds, still plugging away at 155 megabits per second, when the world needs the 2.4 gigabit-per-second speed that is thought of mainly in conjunction with Internet 2, at this point.
It's a long way from the days when traffic on the Net could only be for what the National Science Foundation deemed was "an acceptable use." If you've survived this long, take a breath, check your pulse and get your house in order.
The ride is only starting. And Schopenhauer, wherever he is, is about to witness how the rate of change, at least in this business, may not be perpetual. It could just accelerate.
WorldCom Inc. can be reached at www.wcom.com
MCI Communications Corp. can be reached at www.mci.com
America Online Inc. can be reached at www.aol.com
IBM Corp. can be reached at www.ibm.com
EarthLink Network Inc. can be reached at www.earthlink.net
AT&T WorldNet can be reached at www.att.net
Table Of Contents:
ISPs Blaze Diverse Trails Into Changing Market
ISP Technologies: Choosing Which Knives To Juggle
Top-Notch Customer Service Requires Change In Focus
Billing Systems More Important Than ISPs Realize
The ISP Survival Guide is sponsored by:
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