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 Bandwidth Shaping Ever Be Obsolete?December 1, 2012 — netequalizer
By Art Reisman
CTO – www.netequalizer.com
I find public forums where universities openly share information about their bandwidth shaping policies an excellent source of information. Unlike commercial providers, these user groups have found technical collaboration is in their best interest, and they often openly discuss current trends in bandwidth control.
A recent university IT user group discussion thread kicked off with the following comment:
“We are in the process of trying to decide whether or not to upgrade or all together remove our packet shaper from our residence hall network. My network engineers are confident we can accomplish rate limiting/shaping through use of our core equipment, but I am not convinced removing the appliance will turn out well.”
Notice that he is not talking about removing rate limits completely, just backing off from an expensive extra piece of packet shaping equipment and using the simpler rate limits available on his router. The point of my reference to this discussion is not so much to discourse over the different approaches of rate limiting, but to emphasize, at this point in time, running wide-open without some sort of restriction is not even being considered.
Despite an 80 to 90 percent reduction in bulk bandwidth prices in the past few years, bandwidth is not quite yet cheap enough for an ISP to run wide-open. Will it ever be possible for an ISP to run wide-open without deliberately restricting their users?
The answer is not likely.
First of all, there seems to be no limit to the ways consumer devices and content providers will conspire to gobble bandwidth. The common assumption is that no matter what an ISP does to deliver higher speeds, consumer appetite will outstrip it.
Yes, an ISP can temporarily leap ahead of demand.
We do have a precedent from several years ago. In 2006, the University of Brighton in the UK was able to unplug our bandwidth shaper without issue. When I followed up with their IT director, he mentioned that their students’ total consumption was capped by the far end services of the Internet, and thus they did not hit their heads on the ceiling of the local pipes. Running without restriction, 10,000 students were not able to eat up their 1 gigabit pipe! I must caveat this experiment by saying that in the UK their university system had invested heavily in subsidized bandwidth and were far ahead of the average ISP curve for the times. Content services on the Internet for video were just not that widely used by students at the time. Such an experiment today would bring a pipe under a similar contention ratio to its knees in a few seconds. I suspect today one would need more or on the order of 15 to 25 gigabits to run wide open without contention-related problems.
It also seems that we are coming to the end of the line for bandwidth in the wireless world much more quickly than wired bandwidth.
It is unlikely consumers are going to carry cables around with their iPad’s and iPhones to plug into wall jacks any time soon. With the diminishing returns in investment for higher speeds on the wireless networks of the world, bandwidth control is the only way to keep order of some kind.
Lastly I do not expect bulk bandwidth prices to continue to fall at their present rate.
The last few years of falling prices are the result of a perfect storm of factors not likely to be repeated.
For these reasons, it is not likely that bandwidth control will be obsolete for at least another decade. I am sure we will be revisiting this issue in the next few years for an update.