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RealTime IT News

State Of The ISP Nation

BALTIMORE -- Industry leaders spoke about the future of Internet access to a packed crowd of Internet service providers attending an informal debate at ISPCON Thursday morning.

The three-man panel of Charles Ardai, Juno Online Services, Inc., president, chief executive officer and director; John Kane, Telseon chief executive officer; and Michael Mael, president of Focal Data Communications, sometimes agreed and other times didn't on issues that affect ISPs in today's market.

The topic on everyone's mind was the drastic slowdown in business following the collapse of venture capital funding and the subsequent bear market.

The financial affliction has affected companies spanning the spectrum of Internet access: from digital subscriber line modem makers like Copper Mountain to networking companies like Nortel Networks to providers like NorthPoint Communications.

NorthPoint nonwithstanding, Ardai said the bear market today is a good thing for companies already in business -- ones that handled their venture capital money wisely in the past.

"(A general slowdown) is not necessarily a bad thing," said Ardai. "It's a very bad thing if you want to start up a new company now and want to get funded. This slowdown means you have fewer competitors and other competitors are going out of business."

For ISPs that means those in the business now are going to face some lean times ahead, but by just surviving they are positioning themselves for success in today's market.

"There's something to be said about surviving," said Mael. "(Dial up) isn't going away, because people will continue to use it."

According to Mael, remaining successful depends on more than just getting more customers to make more revenue. It takes a concerted effort by the ISP to keep the customers it already has and use the relationship to market new products.

"When times are tough, it's a whole lot easier selling to your existing base of customers and keep them happy than trying to replace them with a whole new set of customers," Mael said.

The future of Internet connectivity, especially dial up connectivity is very bright, despite concerns by many ISPs that the old-school method is going the way of the bulletin board service (BBS) of the late 70s and 80s. With less than 70 percent dial up penetration rates, on average, around the country, dial up's a product with a lot of leg left.

Juno, the fourth-largest ISP in the nation, with nearly four million dial up customers, has a vested interest in the future of dial up connectivity.

But for the past couple years, broadband has been the darling of the media and a growing number of high-speed businesses and consumers.

Despite that, Ardai said Juno is still committed to a strong dial up access customer base and the success of dial up in the U.S.

"I used to be embarrassed to come to an event (like ISPCON) and talk about dial up, because I knew that I couldn't raise any money and get laughed at by people," Ardai said. "But the truth of the matter is, dial up is going to be here for a long, long time."

That flies in the face of figures by Dave Baker, dial up ISP EarthLink, Inc., director of law and policy issues, who said at the convention that dial up access has flatlined, with future ISP growth dependent on broadband access.

Ardai said high-speed venues like DSL and cable Internet access have yet to get past the "my dad" threshold. "My dad" users are reluctant, inexperienced computer users who aren't willing to get broadband Internet because of the difficulties both sides of high-speed Internet are experiencing as far as service, and paying double or triple the cost of dial up access.

Juno, an ISP with a mixture of free and premium paying dial up users, has been lumped in with other free ISPs, who have completely different business model. The financial failure of these free ISPs led many to think that Juno will fail also.

An anonymous post at f**kedcompany.com earlier this week reported that Juno was about to go under.

Ardai had a chance to defend erroneous rumors of his company's imminent financial demise, saying it's the price of doing business in today's world.

"There have been rumors about Juno's demise for about five years now," Ardai said. "If we replied to every rumor that came out, we wouldn't have time to do any business. We just have a policy of not answering any rumors and let them fall where they may."

"I will say this, however," Ardai continued. "The core of the reports seemed to suggest that we were about to go bankrupt, which is ridiculous. We ended (2001) with $56 million in the bank, with an expected net loss of about $25 million. Rumors are just something you have to expect when you're in this business."

Wireless Internet, the third leg in the broadband access triumvirate, got short billing by all panelists in the debate, relegating it to niche market status.

That's not to say that ISPs who have a viable business model to capture those customers shouldn't go for it, said Mael, in the case of a wireless phone that plays games on its miniscule screen attracting only 10,000 customers in the U.S.

"The interesting question is, if it's the right 10,000 people and if they're willing to pay the right amount of price for it, why not go for those consumers," Mael said.

The debate over broadband is all predicated on the belief that ISPs will be able to offer broadband connectivity in the form of DSL.

Broadband ISPs have been falling by the wayside the past year, as the price to do business and the difficulties provisioning the service from the incumbent local exchange carriers (ILECs) has driven them into bankruptcy courts.

Ardai and Mael remained optimistic about the future of ISPs and DSL service.

"There's always going to be competition," Mael said, "because consumers and businesses want choice. They aren't going to stand for just one company, the telephone companies, providing the only DSL service."

Kane, on the other hand, is not as confident. Many analysts have been predicting that ILECs, who own the lines ISPs sell the DSL service over, have the last word.

"In the end, the ILECs are going to win," Kane said. "They're going to be the ones to compete with cable and fixed wireless in the fight for broadband acceptance."