Editorial: ISPs Can Survive

While the FCC seems determined to eliminate independent DSL, survival strategies exist for ISPs willing and able to adapt. We identify three key skills and two elements of local geography that could be vital to your success.

by Alex Goldman ISP-Planet Managing Editor [September 8, 2005]

In August of this year, the FCC decided to eliminate the residential business of most independent ISPs (see, for example, Bells Free From DSL Obligations). Commentators such as ISPCON's Jon Price see FCC Chief Kevin Martin as trying to fulfill a difficult promise, deciding to destroy competition to deliver service to residential users.

Others have been even less forgiving. Dana Blankenhorn accused Martin of lying for political purposes, noting:

This is Orwell's FCC. Monopoly is called competition. Martin claims there is intense competition from Wireless ISPs and satellite providers, when in fact those companies are being driven out of the market. The vast majority of consumers and businesses today have just two choices for broadband—their local phone monopoly and local cable monopoly, who together enjoy a duopoly and monopoly profits that lets them write-down their 30-year property in a world best served by three-year write-offs.

Jupiter Research Broadband Analyst Joseph Laszlo was equally irked, writing in his blog:

And what really irritates me is the whole "we're behind in broadband" rationale for doing this.

From the CNN/Reuters piece: "The United States has fallen to 16th in world rankings of broadband deployment per capita, leading Republican FCC Chairman Kevin Martin to make rolling out high-speed Internet service to consumers a top priority."

Great, Commissioner Martin. But can you point out any of those 16 nations ahead of us in penetration that doesn't require wholsale DSL access from their PTT/incumbent telco?

Strategies for survival
So, many ISPs will go. But survival strategies exist. ISPs are local businesses, and an ISP's success or failure will, we feel, depend more upon local circumstances than business acumen. We see two elements in local geography, and three ISP skill sets, that could determine that ISP's success or failure in the near future.

1. Access to fiber
2. Public private partnerships
3. Wireless RF skills
4. Business integrator skills
5. Current number of business customers

Access to fiber will, we think, be the most important determinant of an ISP's ability to do business in the future. Fiber is available in places you might not expect. Williamsport, Pa. is not the largest city in Pennsylvania, but it has a great deal of fiber. Fiber has helped businesses as diverse as Easystreet in Oregon and Conxx in rural Alleghany County, Md. Fiber is particularly useful to fixed wireless providers who often find they can deliver more bandwidth over the last mile than they can backhaul. It goes without saying that the only reliable provider of fiber connectivity is a non-RBOC provider, and ISPs will suffer as the RBOCs absorb AT&T and MCI.

Public-private partnerships provide opportunities, especially to local ISPs. The story of Poplar Bluff, Mo.-based SEMO.net shows how a local ISP can work with city government to ensure that a municipal project helps it. Timothy Hicks, SEMO.net director of marketing, told us, "the municipal government doesn't want to compete with taxpaying businesses." No city government wants to be accused of competing with local business.

Wireless RF skills will help any ISP grow, giving it an alternative pipe to the monopoly-controlled one. Commentators and practitioners have adopted wireless precisely because it is an alternative to the RBOC (see for example, David Isenberg's Wi-Fi Planet Conference & Expo keynote, Wi-Fi vs. Telcos). Dave Hughes has argued that wireless is, in the long term, a much cheaper way of connecting schools to the Internet and that the USF, by preventing schools from going wireless, is an insidious RBOC subsidy. As the Conxx story (above) shows, an independent ISP can work with local government to connect the entire government, including schools, administrators, and first responders, for far less than the RBOC. Fixed wireless broadband providers may even be able to retain residential customers.

ISPs across the U.S.—especially WISPs—are providing more and more services to business customers. Those services often start with WLAN management or a website but can include higher value offerings such as emergency troubleshooting, backup, security, groupware and collaboration, and other services that are tied closely to the day to day processes of the business customer. No ISP should try to offer these services without the skills needed to deliver, but every ISP should be trying to obtain the skills needed. We will be devoting significant space here at ISP-Planet to helping ISPs make this transition. A whole group of businesses, known as Value Added Resellers (VARs) or integrators, already have these skills. VARs range in size from small, local outfits, often specializing in a particular business, to massive global consultancies such as IBM Global Services.

Many ISPs already have business customers. Those ISPs that are already offering hosting or other services will find the transition to the post-competition world far easier. Here at ISP-Planet, we look forward to hearing from you and to disseminating community knowledge. Every entrepreneur has a piece of the puzzle; everyone can learn something from others.

Update
Kris Twomey, ISP industry lawyer, writes to us, "I just read your editorial on ISP survival. There is one other way too, to start their own CLEC and install DSLAMs in central offices. This solution has its limitations, such as requiring a certain degree of subscriber density. But it’s either go this route or figure out how to be a WISP."

— End