Small Biz Entry Into ISP Market
Larry Berg <nwsyslaw@netcom.com> Mon, 04 April 1994 00:43 UTC
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Date: Sun, 03 Apr 1994 14:08:46 -0700
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From: Larry Berg <nwsyslaw@netcom.com>
Subject: Small Biz Entry Into ISP Market
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It seems to me that the underlying basis for the current discussion re: CIX membership is that the current market conditions and technical feasibility is such that there is a significant number of individuals who are preparing to get into ISP on a market entry level. Although I have not been involved in this service industry long enough to know firsthand what the conditions were like at the time that someone such as Karl Denninger started his operation, it seems obvious that those conditions have changed. Karl, through his personal vision and his willingness to take on the risk inherent in high-tech entrepenurial start-ups, now has a competitive advantage over other entrants who try to follow in his footsteps. Furthermore, in the event that some conglomerate or large player decides to dominate the ISP market, Karl is in an excellant position to negotiate a sale or merger of his operations, hopefully at a price that will fairly compensate him for his efforts and give him the financial freedom to pursue some other dream [say perhaps starting an offshore data haven, :-)]. Other smaller late entries into the market may not be so fortunate. A low-tech analogy is the proliferation of soft yogurt franchises in the late '70s. New technology. New distributors. Good product. Demonstrated consumer demand, and small businesses seemed to pop up on every block. Many of them were mom and pop type operations, and when it became evident that there was more supply than demand, many of those small business ceased to exist. To the extent that the product was consumable, they did not have a client base that relied upon them the way that an ISP customer does, however, by now most people understand the consumer risks associated with doing business with discount brokers. The real issue IMHO is whether the industry/network is going to facilitate the emergence of small businesses as micro providers or coo-ops or whatever. It seems apparent that it is happening and it is going to continue to happen. To someone who is investing their life savings (which we all know does not amount to much for most people) to start up as a micro-ISP, a $10K ante is a big bite to swallow. While it would be nice to start a business with institutional financing the rule of the road seems to be that if you need it you cant get it, and if you dont need it then it is readily available. Most start-ups are financed through second mortgages, family loans, and credit cards. There is a legitimate concern that the industry image will suffer from undercapitalized small ISPs going out of business (for any reason), negatively impacting their customers in the process. One way to minimize that negative association is to legitimize those small operations and then compete on the basis of enhanced service and value added products. It is not enough to say "show me a better way and I'll consider reforming the industry". How are we going to stabilize this industry if we do not know who is doing business or what kind of business they are conducting? If the reform does not come from within, then we should all be prepared for the reform to come from outside in the form of legislative and regulatory intervention. How many ISPs are currently paying the CIX membership fee and who are they? If CIX does not evolve to address the way that people are doing business then it will cease to be a viable organization. There is a strong tradition of small business development in this country which has steadily diminished during the past twenty years. It is up to the established ISPs to take the lead in this arena. Is the risk that the future of the ISP industry will be determined by outside forces greater than the risk of legitimizing your competition? If so, then I suggest that this "flawed CIX" discussion take a more constructive approach to developing non-settlement interconnectivity on behalf of all ISPs. Sincerely, Larry Berg nwsyslaw@netcom.com Seattle, WA (206) 933-6928 NO FANCY SIGN-OFF GRAPHICS [yet ;-)]
- Small Biz Entry Into ISP Market Larry Berg