Growth takes time, a lot of thought, patience, and effort. If you focus on growing your ISP's subscriber base one customer at a time, you will overcome rival ISPs in your market—one competitor at a time.

by Brock Henderson Brock Henderson & Associates [July 22, 2002]

There was a lot of chatter recently on one of the ISP-Lists discussion groups about competing against large, national Internet service providers. Since so many small, independent ISP operators view America Online, MSN, and EarthLink as direct competition, I wanted to examine how independent ISPs view their role in the market.

Your ISP's competition is defined by the market area it serves. If your ISP's coverage area is a single city, then your market is that single city. Similarly, if your ISP's service area covers three cities, then your market consists of the same three cities. The same rule holds true whether your ISP serves three states or 30 states.

Your ISP's competitors are those ISPs that offer similar services in your market. Remember, there are more local and regional ISPs than there are national ISPs, so national ISP businesses actually have more competition than your ISP does.

You are probably saying to yourself, "I know this already." But here's my point—there are only two competitors that you really need to focus on and worry about:

the guy directly in front of you and,

the guy directly behind you.

Ever run in a race? Let's assume you are running in the Boston Marathon. It's your first time and you don't have any experience, so you are put in the back of the starting lineup, behind of a large pack of other runners. There are thousands of other competitors, just as determined to win as you are, lined up in front of you. In order to win the race, you must pass each runner in front of you—one at a time. As you pass each competitor, you become closer to attaining your goal of being the leader of the race—the king of the hill.

While you are running, you are focused only on two individuals. The is the guy in front of you that you want to pass so you can get closer to the lead, and the guy right behind you who wants to pass you and come between you and your goal. The same is true in the ISP arena—your only real competitors are the guy that's just a little smaller than your ISP working to surpass you, and the guy immediately in front of you that you want overtake.

What about all the other local and regional ISPs that offer similar services in you market, and what about AOL, MSN, and EarthLink—don't they count? Because the guy directly in front of you is operating the ISP that is just a bit larger than your operation, until you surpass it, you can't even consider getting into a foot race with your largest local competitor. Remember, the competitor right behind you is trying to pass you right now.

Yes, all the other local, regional, and national competitors in your market have a direct and indirect impact on your business, but only to a certain degree. If your ISP has 5,000 subscribers, you aren't going to say to yourself, "Tomorrow I need to beat AOL." No, you're saying, "tomorrow I want to serve 6,000 subscribers so I can be bigger than Joe's ISP on the other side of town."

AOL annoys most ISP operators because it can spend tons of money on expensive television advertisements—ads that you see every night. AOL is in your face with its advertising campaign, its sign-up disks are everywhere, and this just boils your blood. But in your town, within your market, AOL is just one of many other competitors, and you must beat the local competition before you can even think about challenging AOL.

Don't worry about AOL—it will out-spend your ISP business on advertising any day of the week. But remember this means that AOL's cost of acquiring a customer is much higher than yours. With your ISP's success through continued growth, you are forcing your competitors—all of them—to increase their advertising efforts. While your advertising expenditures remain steady, your competitors' costs are increasing. So, who is winning the race?

The guy barking at your heels wanting to overtake your ISP in this foot race is a greater concern than AOL. This ISP operator is watching you and will look to capitalize on any mistake or misstep you might make. Like you, this ISP operator wants to be King of the Hill, so he will leverage every mistake you make. This is why the guy behind you is more of an immediate threat to your ISP's market share, than any other competitor. The immediate threat certainly isn't AOL.

It's not an easy race you are in, but it is winnable if you work at it correctly. You really can be King of the Hill, and to do it you must defeat one competitor at a time. Growth takes time, a lot of thought, patience, and effort. If you focus on growing your subscriber base one customer at a time, you will overcome your rivals, one competitor at a time.

—End