ISPCON ISP-CEO Session, Spring 2004

The ISPCON ISP-CEO session covered a wide range of topics. We summarize most of the key points of the session here—but nothing beats actually being there.

by Alex Goldman ISP-Planet Managing Editor [April 15, 2004]

The ISP-CEO panel kicked off with introductions from the panelists. Moderator Elliot Noss, president and CEO of TuCows, which needed no introduction, asks panelists to identify themselves, their geographical location, and their number of subscribers.

Doug Luce, founder and president of Pittsburgh, Pa.-based Telerama, said his ISP, founded in 1991, has about 8,000 landline users and about 2,000 hotspot users in Seattle, Pittsburgh, and other cities not yet announced.

Dave Robertson, president of STIC.net, said his ISP operates primarily in the San Antonio, Houston, and Austin areas, serving 10,000 end users, and also has a webhosting operation.

John Beaston, vice president of customer services and co-founder of Portland, Ore.-based ISP Easystreet, said the company serves about 15,000 subscribers, of which about 8,000 are business subscribers, making Easystreet a business-focused ISP.

Will Pemble, CEO of webhost Web.com, said his company is located in Los Angeles with an office in Brookfield, Conn.

Donny Smith, president and CEO of Owatonna, Minn.-based CLEC Jaguar Communications, said he has 1,000 customers, including several ISPs. End users total over 20,000 dialup and several thousand DSL.

ISPs thrive by evolving
Noss commented, "this shows that ISPs don't die—they just become another business." He then asked the panel who they lose customers to.

Smith said that the key is not to lose customers, because you want to spend your marketing money acquiring new customers, not reacquiring old ones. He has lost some customers to unlimited long distance plans, but sees that as more of a regulatory issue than a competition issue. "We are worried about regulatory threats," he said.

Beaston said that his company does lose some customers based on pure price competition.

Robertson, who is also involved in activism concerning regulation, and won an award at ISPCON a year ago for his work in that area, said that there are serious problems. He did not mince words (not that he usually does). "Dialup users will eventually migrate to broadband, and any ISP that cannot find a way into broadband will go the way of the dinosaur. In my area, broadband over powerline, and wireless, are not yet mature enough for me to offer them to my customers."

He added that regulators are not interested in allowing ISPs into the cable and DSL markets. "Right here at ISPCON, we're sitting inside the beltway, and the beltway wants you all to die."

He said every ISP should attend an ISPCON evening session announcing a new alliance that will speak for the ISPs (more on this alliance in a future article).

Noss asked the panel what they were doing to fight the SBC Yahoo! broadband model, where the affiliate allows the monopoly provider to charge much less than wholesale to retail customers.

Luce said that hotspots allow Telerama to take a $50 per month DSL line and turn it into a $300 per month hotspot. Noss pointed out that Luce is building a hotspot skill set within the company that will outlast dialup.

ISPs need more revenue
Noss challenged all ISPs to stop giving away service they could charge for.

Robertson asked the audience how many ISPs did training sessions. About 10 percent raised their hands. Robertson suggested renting a room in a local hotel, or several rooms, for one day. Each room should hold 50 to 100 people. Charge only about $10 to go to the one day computer class. Each classroom has only one computer, which is used by the instructor because otherwise the class moves at the pace of its slowest learner, which is too slow.

"Teach them how to use the computer, and they'll come back to you for Web page design services," he said. Classes run all day, and are repeated, once in the morning, and once in the afternoon. There are evening sessions in which the most important classes are repeated for a third time.

Pemble said that a cardinal rule at Web.com is that the company must make a penny on each transaction, such as the sale of a single domain name.

Noss asked the ISPs if they had any loss leaders. Of those who claimed to have none, he asked how many were giving away e-mail for free. One said that the e-mail mailbox is included in a higher than usual price for his company's services.

Beaston said that Easystreet sells collocation in shared space for as low as $200 to $250 after power pricing is calculated. Luce said that Telerama has a "ghetto colo" for computer geeks who need no help. Absolutely no service is provided, but users pay only $50 per month.

Pemble said that there is no race to the bottom in hosting, because buyers appreciate that they're paying for a good service.

Noss said, however, that U.S. ISPs can compete favorably with European ISPs because power costs in the U.S. can be as low as one-eighth of what they are on Europe (depending on the nation).

Noss then said, "almost all costs are going down. Are any going up?"

The panelists replied that health care costs, and overhead for staff, are rising, and that this is a real concern.

Pemble said he'd examined outsourcing as an option, but found that in cases where decisions had to be made, the problems came right back to him. Noss said, "support is where you beat the telco. I do not know why you would outsource your competitive advantage."

Robertson said that the DMCA creates costs—and that if you're not DMCA compliant, you could lose your entire business when a copyright violator who is your customer gets sued.

Note to readers: does your TOS say that you can cut off service if your customers break the law?

Noss asked if anyone was providing high end training. One audience member said they'd opened up the office so that it has a computer store and training center, which had definitely helped the bottom line. Another said that 70 percent of the company income came from network engineering, supporting customers like a law firm with 100 people.

Pemble said that he pays his tech support people $50,000 per year, but makes them a profit center. "We found customers would pay the money if we would fix the shit," he said.

He says that he now hires for attitude, and has built a two week boot camp for employees, so that they are always current.

Noss said, "another ISP disease is the feeling that you've got to do everything yourself. If you do that you have no time to train people."

Smith added, "many of us come from a specific background, like tech or marketing, and we don't want to give up that part of the business. I'm a programmer and I still do that sometimes, but I need to concentrate on the long term plan. If you're here today at ISPCON for something you need now, you're at the wrong show. You should have been here a year ago.

Noss concluded that there were three central points of the ISP-CEO session:

1. It's good to have less sophisticated customers, not bad
2. ISPs should charge for stuff
3. ISPs need to keep diversifying because the market is always changing

— End