Insights From ISPCON's ISP-CEO Roundtable

by Christopher Knight [November 1, 1999]

At Penton Media's Fall ISPCON '99 in San Jose, Calif., the CEOs of several dozen ISPs converged in a three-hour private session to discuss issues of mutual concern. Here are some of the revelations and highlights that came out of this closed-door meeting.

Controlling Circuit Costs
Connectivity costs are high across the board. It appears that regardless of location, ISPs are paying very high spreads for the same circuit. One of the most negotiable, but often overlooked or under-negotiated aspects of circuit provisioning is that you can often get setup fees on PRI's, T1's DS3's, etc. waived, resulting in thousands of dollars in savings annually. The setup fees on these circuits are often discountable by your telecom sales rep without cutting into their commissions.

Aggregating POPs through CLEC Relationships
Reducing the number of POPs (points of presences) an ISP maintains is becoming an attractive proposition, as many CLECs are offering to haul for free or at very low cost. Aggregating POPs lets ISPs maintain higher subscriber-to-port ratios, which results in significant savings. Part of the savings is realized in reduced capital expenditures, as you don't need additional routers, network gear, etc. There is also a major rent savings from not having multiple leases or time commitments for real estate in various cities.

Paper Billing Out; Email Billing In
Some ISPs are figuring that it costs them as much as $5 per invoice to bill via snail mail. Email based billing can significantly reduce this expense. One alternative solution discussed was sending a 12-month coupon book, similar to those that mortgage houses send to their clients, thus saving most of the cost of 11 monthly paper invoices.

Advertise or Perish
If you really want to grow, you must keep advertising and marketing. Stop advertising, and you'll find your growth stagnating. A good range for your marketing budget is 4 to 10 percent of your total gross sales. If you want your existing clients to refer business and their friends, you must continue to market to them and remind them to favor you with positive word of mouth advertising.

Rewards of Hanging In There
This was the fourth ISP-CEO roundtable to be held at ISPCON events. We noted that only 20 percent of the attendees from the previous ISP-CEO roundtable were present at this year's gathering--indicating that many CEOs had cashed out and exited the ISP industry (as many had hinted previously).

A number of the ISPs attending have grown by 20 to 80 percent since the last ISPCON CEO Roundtable. It was pointed out that despite having received what seemed like 'ridiculously high' buyout offers, if their growth continued as it has over the last year, within a few years, the high offers would really equal only about one-tenth of their real value.

The bottom line is that there is no greater time to be an ISP than today, and the potential rewards at the end continue to climb for those who are brave enough to continue handling the curve balls that are being thrown at the extremely volatile ISP industry.

To Your ISP Success!

Christopher ("Sparky") Knight
ounder & Managing Editor of the ISP-Lists Discussion Community

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