Make Your ISP Facilities-Based or Virtual?

Yesterday, we examined the Pros and Cons of running Facilities-Based ISPs . Today, we turn the tables and consider the advantages and disadvantages of NON-facilities based ISPs:

Advantages of Non-Facilities Based ISPs

• You can spend your available capital on marketing & sales expenses, which improves your chances of generating new subscribers, rather than sinking it into hardware, which does not increase sales.

• Flexibility is high. You can start an ISP overnight and private-label, it ALL through any dialup-access-switch wholesaler. This is great for folks who want to do the new vertical ISP concept we're seeing being introduced this year.

• You don't need high-end technical support for dial-up access switches. This can save a lot of tech labor when things go wrong: you just pick up the phone and call your wholesale provider.

Disadvantages of Non-Facilities Based ISPs

• You may have to wait for the newest enhancements—for as much as 6 to 12 months after the rest of the market gets them-as wholesalers usually follow fast, but don't lead new technology.

• You are totally reliant on someone else to deliver the service you are selling, and your reputation may suffer if they do not care as much about up-time and quality as you do.

Which is right for your ISP?

There is no easy answer to answer this question, as a series of issues comes into play when deciding how your ISP will be setup. These include—

• your available capital
• how far you want your geographic reach to be
• the strategic future direction for your ISP

You may also think about your ISP exit strategy in the course of making the above decision. If you choose to be a non-facilities based ISP, it's much easier to sell to another non-facilities based ISP, who can just take over the Accounts Receivable and Accounts Payable without much disruption for your subscribers.

If you're a facilities-based ISP, and you plan to sell to a deep pocketed local telco who wants to get into the game, they're likely to give you a higher valuation than if they had to set up a new relationship prematurely-or before they were ready to go national (say, if you were a non-facilities based ISP with 200 POPs).

Read Part 1 of this article

To Your ISP Success!
—Christopher M Knight, Managing Editor ISP-Lists.com