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The Extinction Of The Mom & Pop ISP Service?
RFL asks: "SFGate (site of the San Francisco
Chronicle) has this feature article describing the unexpected deaths of local Internet Service Providers after they are taken over by large telecommunication companies, leaving the customers totally forgotten. Only after giving it a moment of thought did I realize that a lot of those small ISP's, the ones with those cool cool domain names, were in fact gone. These were the mom and pop services of the Internet, and they provided excellent customer support. I even remember being able to talk to my ISP's administrators on IRC. So is it now fair to say that we have lost yet another battle against those evil corporations?" As it is with most companies that get swallowed up by larger entities, the increase in customer base usually means a decrease in customer support and personal-touch that made earlier ISPs so successful. Is there still room for the small-time ISP in today's market or has dial-up Internet become solely the realm of big-time providers?
I think you have to differentiate between what happens when small ISP customers are absorbed into a large ISP and the service that a large ISP gives its typical customer.
I owned and ran a small ISP for about six years. When we started out, big companies didn't do a very good job of getting people online. Getting the tcp/ip stack to work was often difficult, and strange modem problems were common. So there was a real niche for a company like ours, which could try to put more effort into getting people online.
And when people had problems, they could call or email us, and I'd pick up the phone. I'm not the smartest guy in the world, but I was the person who built the entire system, and I think I was probably able to give better support than the average support guy at a large ISP.
But times changed. If you buy a computer now -- almost any computer -- the odds are overwhelming that it's going to work. It's really easy to set up net service on a modern windows machine. After we sold our company, I went to the Earthlink site and signed up. I was online immediately, with no hassles. And they have access numbers all over the country. I've even used it in Paris. That's a big advantage. I think Earthlink does a good job.
When small ISPs were cannibalized by the large ones, it was very bloody. Customers were jerked around, email addresses were often forcibly changed, and the deals were always very bad for the guys who had the small ISPs. We were lucky -- we sold to another small ISP, and they've just added to our features, nothing was taken away. Not even the shell accounts.
Typically the large ISP wrote the contract -- they agreed to pay so much per customer, but only for the customers who stuck through the transitition. So when 1/3 of the customers dropped off, it was no skin off the big ISP's nose. They didn't have to pay for those people. And there are lots of horror stories about the big guys not paying the money that they owed legitimately, even under the lopsided contracts that they wrote.
We were approached over and over again by large ISPs who wanted to buy us. They would invariably change the terms at the end of the negotiation, and back out of comittments they had made to us. For the most part the guys who built those large ISPs through aquisition were bottom feeders, sharks who were trying to pick the bones of distressed small businesses. Most of them didn't seem like honest guys. So it was never surprising to me that guys like that didn't treat the customers well.
The real problem with the big players is that they're few in number and are vulnerable to pressure. A world with 100,000 mom and pop ISPs isn't as easy to wiretap as a world with 3 blue chip corporate ISPs. And every now and then Time/Warner/AOL or AT&T will say someting really scary -- like how they think that e-commerce people should pay them a commission, how they would be completely within their rights to block access to whatever sites they felt like blocking.
Big ISPs can provide good service, especially in a simpler world where things tend to interoperate more easily. But I don't feel confident that the market or the government will always protect consumers the way that they deserve.
In the old days they forced the guys who owned the movie theatres to sell the studios they owned. The wisdom of such a move isn't apparent to most people now. The "synergy" of having the pipe and the content is seen as a good thing.
I'm certain that we're going to see attempts to build copy protection into the net itself. I think they'll fail, but the companies will try. Those are the kinds of problems, I think, are going to be the real costs of the consolidation of the mom and pop ISPs into a small number of large companies.
You just don't get that kind of service from the big providers.
The wheel is turning but the hamster is dead.
The wheel is turning, but the hamster is dead.
As with everything it all depends on the circumstances. Smaller companies are (in general) far better at customer relations because they have more resources to spend per customer in this department, and the people running them depend on this for their livlihood so they're motivated to help. But a larger company can pass on economies of scale to it's customers in the form of reduced prices, special deals and so on.
It's all a matter of what kind of service you want - cheap or good. And let's face it, most people prefer to have a cheap service that they can then bitch about to one where they pay a lot more but get help. As a culture we're used to waiting half an hour on the phone for some support person who has no more idea about your problem than you do, so we've in a sense become inured to such treatment.
So I think that smaller ISPs aren't really a hugely viable concern. If they could work, I'd say it would be by catering to areas where a lot of help is needed that a large company won't provide - to nursing homes for instance. Otherwise people will try and save a few dollars everytime.
that took over a lot of smaller ISPs. When we took them over, the transition was not smooth. We lost a lot of customers because of increased hold time and the fact that we did not know the quirks of each little ISP. I would like to say that we still gave the customers good service, but it was still not up to par with what they had before. The company I worked for no longer cared about the small ISP customers. They just wanted to switch them over to their national dialup as soon as possible. Benefits like shell access and customized email filtering options were eliminated from the customers accounts without warning. Local dial-up numbers were shut off and the customers were now dialing into 3rd party POPS. I would guess that at least a third of the original customers were lost at each ISP we bought.
The goal of any business is providing an mutually acceptable quality of product or service at a mutually acceptable price in competition in the free market. I would be interested in hearing how exactly this is supposed to be evil. "Because I don't like it" isn't a valid argument: if there's no seller, there can be no buyer, and if there aren't enough buyers, then there can be no seller. That's why large corporations are dominant in the market, because they sell what buyers want.
Similar things happened in the early days of the telephone. Larger telcos got larger buying up smaller local companies. It seems that the market is rapidly changing with broadband access. I mean you used to be able to buy a bank of modems set them up in some local access calling centers (starting with only one in a city perhaps) and build from there. How do you do that when people have cable modems or DSL provided directly by the vendor providing the underlying infrastructure? This transition or it's threat would have weighed heavily on small dialup providers.
The barriers to entry seem to have grown.
Am I wrong about this? Are the days of local ISP's numbered?
While you can sit around and gripe, the other option is to get togetther with a few of your friends, and start your own service.
While this may seem a bit outrageous, it is not that impractical. The Register has this story about Laramie, Wyoming, where they run their own non-profit community wireless Internet service called Lariat (Laramie Internet Access and Telecommunications). It includes high-speed Net access service for a fraction of the price of most services in the US.
The initial cost was about $3,000. Many residents donating their own PCs. Normal dial-up service is $5 a month, $20-$30 a month for high speed (10MB/second). Businesses can now get T1 wireless or SDSL for fee $125 monthly
Information on how to set up a similar enterprise can be found on the lariat site.
"It is a greater offense to steal men's labor, than their clothes"
Ummm, no. Or, at least, not necessarily. There are substantial diseconomies of scale associated with business, and in a service business like the ISP business, there are few or none of the economies of scale that are associated with manufacturing businesses.
For example, the total tech support payroll at the small mom-and-pop (I'm the "pop") ISP that I own is smaller than SWBell's payroll for tech support managers. Those tech support managers don't provide tech support, but they do add to the cost of providing tech support. Therefore, tech support is easier to afford for the smaller ISP than for a company like SBIS.
Of course, the razor thin margins are there and cause failures, but the companies that tend to fail are those that borrowed a bunch of money, (or sold a bunch of stock,) often to buy up smaller companies, and have discovered that they can't make enough beyond their overhead to make the interest payments. In this case, the small ISP's are the ones being bought, not the ones doing failing
Anyway, two things have been obvious to me for some time. First, providing access to the Internet to individuals is not going to be a license to print money, like people were thinking it was going to be five years ago. As you say, the barriers to entry are too low for that to happen. So, the successful ISP will need to focus on other areas to make most of their profits. What Brokersys tries to do is to have the dial-up stuff to pay for its share of the fixed cost, but we make most of our profits on other things. Second, many people will pay a premium to buy their Internet from a smaller company. It is, therefore, a mistake for a small ISP to try to price themselves like the big discounters.