In The News
SOURCE: ISP Planet

ISPCON KEYNOTE: WHO DO YOU WANT TO BE?
In this keynote panel, ISPCON delved into the challenges of four leading ISP business models, moderated by a banker who judges the resulting balance sheets every day.

by Alex Goldman
ISP-Planet Managing Editor
January 25, 2006

ISPCON's second keynote (we covered the first one yesterday in our article ISPCON Keynote: The Noss and Searls Show) was moderated by Paul Stapleton, banker and industry commentator. He would be qualified to talk about how his panelists spend money and time and get them to talk to the session's title: Four Providers You Wish You Were (and how to get there).

Dane Jasper is the CEO of Santa Rosa, Calif.-based Sonic.net. He said the company has 47,000 subscribers and about $13 million in annual revenue and was founded in the mid-1990s. The company is now sufficiently large to featured in our backbone guide.

Jonathan Snyder is president, CEO, and director (and co-founder) of Las Vegas, Nev.-based KeyOn Communications. The company, he said, focuses on small, rural markets. It was founded in early 2003 and is a "top five WISP, growing by acquisition." ISP-Planet's profile of the company is here.

Dan Hoffman is president and CEO of New York City-based M5 Networks. He founded a company to handle phone systems after a previous venture failed because of an expensive phone system that didn't work. "We expect to have $12 million in revenues this year," he said. We consider the company a local VoIP provider.

Rich Bader is president and CEO of Portland, Ore.-based EasyStreet Online Services. He said the company was founded "at the right time" (which was 1994). "Our business focus saved us," he added. "We endured three years of flat revenues post-bubble but just spent a million dollars on our data center."

Marketing
Stapleton opened by asking his panelists about marketing. "ISPs are usually better at technology than marketing," he noted. He also asked panelists to say their ARPU, expecting to show that services at different price points support different marketing campaigns.

Jasper said his company uses Google adwords for marketing, but relies on word of mouth to bring in customers. He claimed his ARPU was $40 to $50 per month.

Snyder pointed out that as a WISP, he has no name recognition in a new market. He relies on guerilla marketing and on local agents and resellers. His ARPU is about $30 per month.

Hoffman said that as a local company, it's easier to build a brand. He said PR is well worth the investment. At an ARPU of about $2,000, his sales are bigger wins. He said that customers look at VoIP service when they switch offices. He added that having a good relationship with integrators and consultants helps his business.

Bader also said that his ARPU is about $2,000 per month. He has a direct sales force and sponsors events and seminars. The company also supports a large number of local non profits.

Capex
Next, Stapleton asked panelists where they're spending money.

Jasper said that his company is investing in all areas, but admitted to Stapleton that about 70 percent of revenue comes from DSL. He's worried about how regulations and regulatory uncertainty will affect the business.

Snyder, the WISP, said he is spending on network reliability, upgrading links. When Stapleton asked whether he's buying spectrum, he replied that the equipment for licensed spectrum is too expensive. "We're acquiring businesses to grow our footprint," he added. "The challenge is that we can become a victim of our success when the network gets overloaded. Debt financing helps."

Stapleton asked if there's a tradeoff between investing in reliability and growth.

Hoffman said that after a recent crisis in which a data center lost power for three hours, he's re-examining the company's emergency plans. "It hadn't happened to us during our first three years, and hopefully it won't happen for at least another three years," he said. The company is expanding into Chicago and Boston and is also looking at knowledge management. "Recruitment costs are going up," he said.

Hoffman added that he expects low cost CLECs to enter the market and is therefore looking at bolstering niche services. "We're examining verticals," he said.

Bader said that he's just spent money on the data center, but expects to fill the space he added within 18 months. He's working on managing growth. "The dirty secret of outages is that they're often caused by keyboard error. We need to be better up at setting up and designing and sustaining networks."

What matters now
Bader, who sees his local area, Portland, as a center of open source excellence thanks to institutions like Oregon State's Open Source Lab and O'Reilly's Open Source Technology Conference, said that Software as a Service (SaaS) and open source present tremendous opportunities to anyone who understands them. "Every VAR is scared of open source," he said. "We know how to make money on open source."

Hoffman said that because VoIP is latency-sensitive, "not all bandwidth is created equal." Reliability and QoS are important, and ISPs need to manage the upstream.

Snyder worried about backhaul costs. "Our bandwidth costs are rising exponentially," he said.

Services
Stapleton asked what value added services are offered by the panelists.

Jasper said that although Sonic.net now offers a managed firewall for business customers, the same product is too expensive for the residential market. "We have not solved the problem of how to offer security for residential PCs," he said.

Bader said that managed routers and security are part of larger offerings, like a complete Intrusion Detection System.

Hoffman said his company devotes a lot of energy in ensuring secure remote access to IP PBX systems for telecommuters.

This brief snapshot of the session merely covers the highlights. Of course there was more, and you should have been there!