As the demand for Internet access continues to grow around the world, opportunities for service providers are emerging in markets far and wide. Yet, simply offering Internet service, even in untapped areas, does not guarantee long-term success. Just as quickly as your customer-base grows, the challenges facing ISPs and WISPs begin to emerge.
From competition to unhappy customers, the business venture that once seemed certain to succeed can quickly test the will of even the most battle-hardened and tech savvy business owners. However, there are ways to make the road to profitability a little smoother.
1. Make Sure You Have an Easy Customer Base to Grow into — Perhaps 500 households before you start building out. Yes, you can do it for less, but 500 is sort of a magic number where you can pay yourself and perhaps some hired help so you can be profitable and take a day off. WISPs and ISPs with 100 customers are great, but, at that size, they will remain a hobby that you may not be able to unload a couple of years down the road. Before you build out do some demographic research.
2. Set Boundaries from the Start — When starting up a new service, don’t let your customers run wide open. You may be OK without putting rate caps on users when you have only 10 customers sharing a 10 meg link, but when you get to 100 customers sharing a 10 meg link, you’ll need to put rate caps on them all. The problem with waiting is that your original users will become accustomed to higher speeds and will not be happy with sharing as your business expands – unless you enforce some reasonable restrictions up front.
3. Keep Your Network from Locking Up — Many ISPs believe that if they set maximum rate caps for their users that their network is safe from locking up due to congestion. However, if you are oversold on your contention ratios, you will lock up and simple rate limits are not enough. Don’t make this mistake.
This may sound obvious, but let me spell it out. We often run into operators with 500 customers on a 20-meg link. They then offer two rate plans — 1 meg up and down for consumers and 5 megs up and down for businesses. Next, they put rate caps on each type of customer to ensure they don’t exceed their allotted amount. Somehow, this is supposed to exonerate the operator from being oversold. This is all well and good, but if you do the math, 500 customers on a 20 meg link will overwhelm your link at some point and nobody will be able to get anywhere close to their “promised amount.”
If you are oversold, you will need something more than rate limits to prevent lockups. At some point, you will need to go with a layer-7 shaper such as Packeteer or Allot NetEnforcer. Or, you can use a NetEqualizer. Your only other option is to keep adding bandwidth.
4. Be the Reliable Alternative — If you are in a dense metro area, and have the resources, you can offer Internet connections to hotel and business customers with pay-as-you-go services. Many hotels and businesses have unreliable connections, or none at all. Obviously you’ll need real estate across the street, but once secured, you can point a directional antenna into the building and give your signal a recognizable name so your users will connect. Then, offer them the connection for a daily fee. For many users, paying a small daily fee for reliable service will be worth it – especially if the hotel or business offers sub par Internet service, none at all, or a connection for an exorbitant price.
5. Good Tech Support Is a Must — Don’t put all your faith into the local guru who set up your network. There are many good technical people out there and there are many more that will make a mess of your business. This can create some really tough decisions. I like to use this analogy:
I’m not a concert pianist – not even close – so I can’t tell the guy that hacks away playing Beatles tunes in the piano bar at my local pub from a Julliard trained pianist. Since I can’t play a lick, they all amaze me. Well, the same holds true for non-technical business owners hiring network techs or developers. They all seem amazingly smart when in fact they may run you into the ground. The only way to tell is to find somebody with a really good track record of making things work for people. So, ask around.
The good ones have no vested interest in making a custom dynasty of your business (another thing to watch out for). It’s like the doctor who needs the patient to stay sick. You don’t want that. Poor or misguided tech support may be the single largest cause for failed ISPs or issues with selling your business.
6. Make Payment As Easy As Possible — When a customer is delinquent on paying their bill, make sure you have a way to direct them to a payment site. Don’t just shut off their service and wait for them to call. For small operators, you don’t need to automate the payment cycle, just send them to a static page telling them how to pay their bill. For larger operators (3,000-plus users), the expense of automated bill payment may be worth the extra cost, but with a smaller set of customers, a static redirection to a page with instructions and a phone number will suffice. Your router or bandwidth controller likely already has this capability.
7. Look for a Competitive Credit Card Processor — Your bank will likely provide a service for you, but they are generally a middle man in this transaction. There are credit card processing agencies that sell their services direct and may be more cost-effective. These are no-brainer dollars that add up each month in savings.
8. Don’t Overspend – Remember that on the open market your business is likely only to be valued at three-quarters of your revenue, so don’t delude yourself and overspend on equipment and borrowing thinking that a white knight will come along. If your revenue is $500,000 per year, you will be in good shape if you get $400,000 for your business. And this may just cover your debt. Yes, there are exceptions and you might get a bit more, but don’t expect two-times your revenue. It’s just not going to happen in the current market, so plan your expenses accordingly.
9. Cross Market — What do your customers see when they login or sign up for service ? Do you send them regular e-mails about your service ? If you answered yes to either of these questions you have ready-made billboards. Don’t be shy about it. Once you have a captive audience, there are all kinds of cross marketing ideas you can do for extra revenue. Done tastefully, your customers won’t mind. This could be a special with the local car dealer running coupons for them. Or for something like a pizza place. There is unlimited potential here, and if you’re not taking advantage of it, you’re missing out on easy revenue.
10. Optimize Your Bandwidth — A NetEqualizer bandwidth controller will allow you to increase your customer base by between 10 to 30 percent without having to purchase additional resources. This allows you to increase the amount of people you can put into your infrastructure without an expensive build out. Yet, a purchase like this can be a difficult decision. It’s best to think in the long term. A NetEqualizer is a one-time cost that will pay for itself in about four months. On the other hand, purchasing additional bandwidth keeps adding up month after month.
11) Look for Creative Ways to Purchase Bandwidth — The local T1 provider is not always the lowest price. There are many Tier 1 providers out there that may have fiber within line of sight of your rural business. For example, Level 3 has fiber rings already hot in many metro areas and will be happy to sell you bandwidth. To get a low-cost high-speed link to your point of presence, numerous companies can set up with wireless backhaul equipment, which is a one time fixed cost for transport.
12) Bundle Data Service with Phone Service — Look into your options for reselling phone service with your data packages.
13) Offer a Discount for Customers that Auto-pay with Electronic Transfer or Credit Card on File — This is usually a win-win for both customer and ISP. The provider won’t have to worry about customers forgetting to pay their bill each month and the client won’t be forced to remember.
14) Offer Troubleshooting Services for Home PCs — You are a reliable tech contact point with your end customers, and likely know as much or more about PC viruses than the people giving out advice and charging for it at the local electronics superstore. You’re also likely in a rural area where good home tech support is hard to find. This would be a great source of additional revenue and you are likely already troubleshooting some home PC problems anyway, so why not make this part of your service and charge for it?
Obviously, these 14 tips won’t apply to every ISP/WISP, but it’s almost a given that at least some of these issues will emerge over time. While there’s no guarantee that any business will succeed, these tips should help steer Internet service providers in the right direction.
Created by APconnections, the NetEqualizer is a plug-and-play bandwidth control and WAN/Internet optimization appliance that is flexible and scalable. When the network is congested, NetEqualizer’s unique “behavior shaping” technology dynamically and automatically gives priority to latency sensitive applications, such as VoIP and email. Click here for a full price list.
Will the Rural Broadband Initiative Create New Jobs?March 17, 2010 — netequalizer
By Art Reisman, CTO, www.netequalizer.com
Art Reisman is a partner and co-founder of APconnections, a company that provides bandwidth control solutions (NetEqualizer) to ISPs, Universities, Wireless ISPs, Libraries, Mining Camps, and any organization where groups of users must share their Internet resources equitably.
I’m sure that most people living in rural areas are excited about the prospects of lower cost broadband. But, what will be the ultimate result of this plan? Will it be a transforming technology on the scale of previous campaigns implemented for electricity and interstate highways? Will the money borrowed see a return on investment through higher productivity and increased national wealth?
The answer is most likely “no.” Here’s why…
Here are some questions and issues to consider:
Are rural communities really starved for bandwidth?
Most rural small businesses already have access to decent broadband speeds and are not stuck on dial up. To be fair, rural broadband currently is not quite fast enough to watch unlimited YouTube, but it is certainly fast enough to allow for VoIP, E-mail, sending documents and basic communication without the plodding of dial up.
We support approximately 500 rural operators around the US and the world. The enabling technology for getting bandwidth to rural areas is well established using readily available line of sight back haul equipment.
For example, let’s say you want to start a broadband business 80 miles southwest of Wichita Kansas. How do you tap into the major Internet backbone? Worst case scenario is that the nearest pop to a major backbone Internet provider is in Wichita. For a few thousand dollars, you can run a microwave link from Wichita out to your town and using common backhaul technology. You could then distribute broadband access to your local community using point to multipoint technology. The technology to move broadband into rural areas is not futuristic, it is a viable and profitable industry that has evolved to meet market demands.
How much bandwidth is enough for rural business needs?
We support hundreds of businesses and their bandwidth needs. From our observations, what we have found is that unless a business is specially a content distribution or hosting company, they purchase minimal pipes, much less per capita than a consumer household.
Why? They don’t want to subsidize their employees’ YouTube and online entertainment habits. Therefore, they typically just don’t need more than a 1.5 meg for an office of 20 or so employees.
As mentioned, bandwidth in rural American towns is not quite up to the same standards as major metro areas, but the service is adequate to ensure that businesses are not at a disadvantage. Most high speed connections beyond business needs are used primarily for entertainment -watching videos, playing Xbox, etc. It’s not that these activities are bad, it’s just that they are consumer activities and not related to business productivity. Hence, considering this, I would argue that a government subsidy to bring high speed into rural areas will have little additional economic impact.
The precedent of building highways to rural areas cannot be compared to broadband.
Highways did open the country to new forms of commerce, but there was a clear geographic hurdle to overcome that no commercial entity would take on. There were farm producers in rural America, vital to our GDP, that had to get product to market efficiently.
The interstate system was necessary to open the country to commerce, and I would agree that moving goods from coast to coast via highway certainly benefits everybody. Grain and corn from the Midwest must be brought to market through a system of feeder roads connecting into the Interstate and rail sytems. And, the only way to transport goods from anyplace must include a segment of highway.
But the Internet transports data, and there is no geographic restriction on where data gets created and consumed. So, there is not an underlying need to make use of rural america for economic reasons with respect to data. Even if there was a small business building widgets in rural America, I challenge any government official to cite one instance of a business not being able function for lack of Internet conectivity. I am able to handle my e-mail on a $49 -per-month WildBlue Internet connection 20 miles from the nearest town in the middle of Kansas and my customers cannot tell the difference — and neither can I.
With broadband there is only data to transport, and unlike the geographic necessity of farm products, there is no compelling reason why it needs to be produced in rural areas. Nor is there evidence of an issue moving it from one end of the country to another, the major links between cities are already well established.
Since Europeans are far better connected than the US, we are falling behind.
This comparison is definitely effective in convincing Americans that something drastic needs to be done about the country’s broadband deficiencies, but it needs to be kept in perspective.
While it is true the average teenagar in Europe can download and play oodles more games with much more efficiency than a poor American farmhand in rural Texas, is that really setting the country back?
Second, the population densities in Western Europe make the econimics of high-speed links to everybody much more feasible than stringing lines through rural towns 40 miles apart in America’s heartland. I don’t think the Russians are trying to send gigabit lines to every village in Siberia, which would be a more realistic analogy than comparing U.S. broadband coverage to Western Europe in general.
Therefore, while the prospect of expanded broadband Internet access to rural America is appealing for many reasons, both the positive outcomes of its implementation as well as the consequences of the current broadband shortcomings must be kept in perspective. The majority of rural America is not completely bandwidth deprived. Although there are shortcomings, they are not to the extent that commerce is suffering, nor to the extent that changes will lead to a significant increase in jobs or productivity. This is not to say that rural bandwidth projects should not be undertaken, but rather that overly ambitious expectations should not be the driving force behind them.
Looks Robert Mitchell in this 2007 PC World article disagrees with me.