On Starting a Successful ISP?

Tigris666 asks: "I would like some handy hints from all /.'ers on what is needed in order to start up an ISP. I'm asking you guys in hope that someone out there has started one before, and i think that's a fair assumption. There are obvious things like mail/web servers, dial-in modems/systems, tech-support employees. But what i'm looking for is an idea on costs (we're talking Australia here), hardware required, and basically an idea on how hard it might be? Things like setting up the internet link, organising the phone lines to be put in, how many servers are needed, and the big thing! Is it all worth it? Does it pay off in the long run?" With larger fish finally jumping into the waters of Internet connectivity, is there still room for smaller companies? I would think that any new ISP would not be able to survive by solely providing dial-up service, and would need to look into the possibility of providing DSL or cable connectivity. However, providing broadband connectivity is a significant and expensive venture, made even more difficult considering the current economic conditions. What suggestions do you have for anyone who thinks themselves up to it?

"Basically the idea came up because the area I am from is in the country. There is only 1 service provider out there, and they are really bad with disconenctions, among other things, and everyone i know absolutely hates them. I think starting an ISP would be a good oppurtunity. I have recently moved to the city to get a real job, however I much prefer living in the country, so this will certainly be a big step."

Comments

Re:Best Advice

[matth]

A friend of mine and I have started an ISP for very few start-up costs. We accomplished this by renting lines from UU.NET and then we provide the mail/radius, etc servers. They are in a data center. So it's been very inexpensive for us, and the dial-up line quality seems to be very good frmo UU.NET

Swift-Networks - Nation Wide ISP!

Australia? Who knows...in the U.S., now...

[RavenDarkholme]

Not knowing anything about Australia and telco costs and so forth, I can't really comment about that. (So why are you posting??)

In the U.S., though, I've worked for an ISP who goes into a lot of little towns where there is no (or little) ISP service. They usually start out with 12 phone lines, which in US dollars is about $300 a month, and a frame-relay 56K connection back to the main ISP which is another couple hundred dollars a month, an Ascend Max 4000 or Portmaster III which you can get on eBay for not too much.

Webserver/mail server/DNS server? Heck, get a couple of lower end Celerons with, say, 128 megs of ram, a couple of 20-gig hard drives, throw Linux with Apache, Sendmail (or Qmail), Radius of some sort (I rather like FreeRadius) and BIND on them, and Ka-boom: instant servers.

Generally, what they do is say to the town: something like, you guarantee us X number of users, and we will bring Internet service to this town. Many times, the people will sign up (and pay!) for service before the ISP even gets out there, thus making it more or less a sure thing for the ISP (and for the users, since if they don't get enough people, the ISP gives the money back).

The big ISP's pretty much ignore smaller communities, so there is still a very large untapped market (at least in the US) for Internet service to small towns or rural areas. You can actually get quite a lot of users online before you have to get more phone lines and higher bandwidth, as well.

So, to sum up: minimum needed to be an ISP in a smaller town:

• Internet connection, at least 56K Frame relay, or higher.
• At least 12 phone lines.
• Dialup server (e.g. Ascend Max 4000/Portmaster III, or linux box with multi-line modem cards)
• Web/DNS/Mail/Radius authentication server Celeron 400, 128 meg Ram, 20 GB drive to start out. You can make these separate servers, but I've seen people run up to 500 virtual apache domains and about 10,000 email boxes on the same machine.
• Ability to remain calm under all customer calls.

That's my 2 cents. :-)

Best Advice

[Flounder]

There is an ISP in Hawaii that provides very inexpensive dial-up service, with a catch. No tech support. Period. They send you a sheet with your dial-up settings. And that's it. For experienced users only.

Tech support for newbies is, by far, the biggest pain in the a** for an ISP. Eliminate them, the job of running an ISP becomes almost enjoyable.

Re:Start up an ISP?

[jguthrie]

Indeed, and very much so.

With all due respect to that person of questionable intelligence who posted that rant about asking Slashdot about this as opposed to doing "research", well, I am the "pop" half of a "mom-and-pop" ISP in Houston, so I can probably give some sort of useful advice. In fact, in my opinion, and I've been doing this for most of the last decade, this sort of question asked in this venue is likely to produce more useful information than going to some library and trying to find a book that describes how to run an ISP. I really pity someone who tries to figure out how to start an ISP by reading back issues of "Boardwatch".

The first thing that I recommend to people who want to start their own ISP is professional psychiatric help. (In fact, I have the names of several very good psychiatrists and even a psychologist or two in and around Houston, TX, US.) If that doesn't convince them that it's more fun to go broke on a trip to Vegas than to accomplish the same task by starting an Internet business, then I can get down to brass tacks.

So, the advice (some of it contradictory) observations, and opinions in no particular order:

• The first thing you need to know about the ISP business is that it is not primarily a "technology" business. What I mean by that is that there is essentially no technical risk. What I mean by that is that you can start an ISP with equipment and software purchased off-the-shelf. That fact is why the margins are so low in the ISP business, and why it's so difficult to stay in business.
• I don't know what it costs in Australia, but it takes most people somewhere between 50,000 USD and 100,000 USD to start an ISP around here. The more technical expertise you have, the less you'll need to spend, but expect to spend at least as much on advertising as you do on ongoing service.
• Unfortunately, people who have money to invest typically want to invest vastly more than that in hopes of getting vastly more return. Around here, this means that you aren't likely to be able to get any venture capital unless you can figure out how to write a business plan that calls for spending maybe 20,000,000 USD per year and breaks even in 48 months. (Lately, I've been toying with the idea of putting together such a plan, getting an investor's money, then continuing to operate on the cheap. I could then break even in 48 hours.)
• If you do go for VC funding, try to talk only to people with money to invest. (Most of the people I've managed to talk to over the years have nothing but some fantasy about brokering a deal with some VC person for a share of the money. This works about as well as jet-propelled pigs.)
• Customer retention is the key to long-term success.
• The biggest barrier to customer retention is persistent connection difficulties. Most of the connection problems your customers will have will be due to the telephone company. However, your customers will be mad at you about it and demand that you fix it despite the fact that you can do nothing to help or hinder the process.
• If you can't balance a checkbook, hire someone who can and then watch them to make sure they don't have sticky fingers.
• If you can't set up a router, RADIUS server, and access equipment, hire someone who can and pay them a salary. Make sure their bonuses are related to uptime rather than "face" time. ("I don't care if the sysadmin's not here as long as the network is running," should be your motto.)
• Everyone at the ISP should resign themselves to the fact that, at a startup ISP, everybody does sales and everybody does tech support.
• Put together service packages and every time someone wants you to bid on a special project, either make it out of those service packages (after the fashion of a "Chinese menu") or don't bid. Putting together bids is a major time sink if you let it become one.
• Try to not lose money on anything you sell.
• Billing systems suck. Some of them suck in different ways and some of them suck expensively, but they all suck.
• Talk to a lawyer and an accountant about the form that the business should take. Limit your liability as much as you can. You won't be able to get out of all of it, because some of the creditors will insist on personal guarantees of payment, but get out of as much as you can.
• Explore and develop ancillary sources of revenue. I know an ISP here in Texas that does for-pay computer training three or four times a year.
• Learn how to work the telephone system to get what you want. I don't know what that means in context of an Australian ISP, because it's different from working the SBC system, but you'll need to do it.
• Use access concentrators and digital phone lines wherever possible. I've used Ascend (now Lucent) Max equipment and they work. Others have used Cisco equipment with similar results.
• It may be possible to find someone who will lease you access to their modem banks. If you can do that, it might be worth your while. However, it adds an additional layer for a customer's problem report to go through, so it may not be worth the hassle.
• Keep backups of all customer data.
• If a vendor neglects to bill you, put the money you would be paying them into an interest-bearing account and leave it there until they notice that you haven't paid. Just because you didn't get the bill doesn't mean that you don't have to pay the bill.
• Try to make yourself superfluous as quickly as possible. Essential people don't get vacations.
• The most necessary tech support training isn't technical. The most important skill a telephone tech support person has is the ability to control a call. The user should be responding to you, not the other way around.

I'm sure there's more, but that's enough for now.

The myth of the failing mom & pop ISP

[PacketMaster]

I've done extensive contracting work for "local" ISPs and I can tell you that they are in no way on their way out. Most people out there are happy with dial-up and aren't interested in the prohibitative prices of broadband. I recently completed some contracting work for an ISP in Western Pennsylvania and they went from 0 users to 1500+ users in about 3 months. There are four major keys to having a successful ISP:

1) You have to be financially committed to grow. When your dial-in lines are full during peak times consistently you need to add more. Nothing will cost you users faster than an ISP that rings busy for 20 minutes before a user can connect. A good rule of thumb is to have enough lines to support 25%-30% of your userbase being connected at any one time. Keep good logs of connect times and if you need more lines, buy them!

2) Provide good service. People will stick with the ISP that provides good service to user's problems, even if it's slightly more than the ISP down the road. Get a good ISP management tool that makes handling your radius/dual-up authentication, e-mail and other services easy and hire a couple of minimum wage people with half a brain to field "1st Level" calls -- high school students would be perfect in this area. That'll take care of 90% of your problems with users who most likely can't type their password or fiddled with their settings. Turnover in these jobs is high, so make sure you have a dummy-proof system that makes training a new hire easy. There are many freeware FAQ/Knowledge Base applications out there to automate this. The one application you DO NOT want to use is ISP Power no matter what their salesman says.

3) Have a solid person or persons behind the technology side of things. Either do it yourself if you have the knowledge, hire someone knowledgable or contract out the work (what I do part-time). Corporate IT is a lot different than ISP IT. Hire someone who knows routers, Radius, etc.. They need to be articulate becuase you'll have an uphill fight with the local teleco for both your frame connections and your Dial-In BRIs. Remeber that local Telecos push their own ISP service and you will not get good support from them if you're an ISP. You need to have someone prepared for a long drawn-out battle who can provide sound answers and be able to monitor and gather data on bandwidth and performance with which to bombard the teleco's tech support. The first words out of their mouth will be "Do you have your router configured properly" and will hammer this at you until you prove conclusively that it's not your router. You need to pick a platform and stay committed to it. Pick an e-mail server that is EASY to configure and maintain. MDaemon for NT/2000 and Qmail for Linux/Unix/BSD are good choices. Pick a hardware vendor you can have a good relationship with. 3Com is an excellent choice for ISP type hardware. Very few ISPs needs the power of Cisco equipment.

4) Take security seriously. Your 31337 Skriptors love to find ISPs with little thought to security or else security that has gone lax. Enforce a password policy, keep good logs and have monitoring systems up and running. Have a zero tolerance policy for spammers and other crackers. Invest in at least a minimal firewall setup for your servers. Spend the time to learn the Unix tools for firewalling or look at a good NT package such as BlackIce (again depending on chosen platform).

You can still be very successful with dial-up ISPs. Broadband will eventually either become cheaper allowing local ISPs to compete in that area or the government will eventually crack those markets open. It's just a matter of time.

One last thing, offer Front Page extension support! I can hear the booing from the /. community on this point but that is what people want, especially from their local ISP. They don't want to mess with FTP regardless of how good the directions are. They want to use their nice shiny pre-packaged Microsoft Web Publication Wizard.

Two Important Words: Think First!

[Joel Rowbottom]

There will probably be a lot of people say this, but the first answer which springs to mind is don't do it. It's very costly, and certainly no longer something you can do with a single Linux box and a DSL connection.

That said, if you do want to do it, first thing you'll need to do is make sure your business plan will be profitable. I know it's tedious, but sit down in front of a spreadsheet program and work it all out: hard questions include:

• Is it feasible? You did say you lived in the country - there's probably a reason there's only one ISP.
• Will it make money? If not, why are you doing it - you're going to have to work out how to pay the rent some other way if it's not going to pay.
• How will you support your customers? When they phone you in the middle of the night because their printer's stopped working, have you got the patience to help them or tactfully tell them that it's not your problem?
• What if your upstream provider goes bust? Once upon a time nobody thought this would ever happen, but after several major providers filed for Chapter 11... :(
• Do you have contracts? Seriously, in this increasingly litigious world you can save lots of hassle, stress, lost sleep, and ultimately cash, by hiring yourself a good lawyer from day 1 who will make sure that all the limited liability blurb is in your contracts. There are a lot of bedroom ISPs out there who have fallen over through someone down the road taking legal action, and them not having the money to fight it. Hence the case doesn't even get to court and the ISP is bust. Be serious: get your contracts sorted and stick to them.
• How will you buy all the kit? Dialup stacks and routing hardware don't grow on trees you know - however I've seen quite a few good deals on Cisco dialup kit on eBay, and if you're doing partial BGP to peer with your upstream providers a secondhand Cisco 3640 will quite happily do the job.
• How will you manage the subscriber base? There are several prebuilt and homecooked packages out there, but you'll probably find that you don't really know what you need until you're up and running. Remember it's a rental system you're running, so you'll need to decide how to work the finances and contracts if someone cancels mid-term - do you refund them an unused portion of a month? What defines a "month", is it the number of days in that month or do you just split a year into 12 of them?

Now assuming you've asked yourself the difficult questions and got satisfactory answers, go out and find yourself a good accountant or at least someone who'll take care of the day-to-day finances for you. If you're a scatterbrained geek like I, then you'll have to reel in some favours perhaps. I use my wife for that sort of thing - it works quite well ;)

Then, and only then, do you start to work out your network map, and do all the fun stuff. Don't be a Dot Com ;)

Note: I've been brainstorming while writing this so there will be a lot I've missed out. I've rescued and set up ISPs and businesses before, some of which have succeeded and some of which have failed. I speak from experience of 1991 through to the present, so don't take this as a base course in setting up a business ;) - usual #include <disclaimer.h> I'm afraid ;)))

Joel.