Data Shows Independent ISPs Have Low Churn

Overall industry churn data is unavailable, but one company provided ISP-Planet with data covering a broad segment of the online population.

by Alex Goldman ISP-Planet Managing Editor [May 7, 2004]

New York City-based Esaya makes a product that, as far as we know, is unique in the ISP industry. The company's TrueSwitch solution allows new ISP customers who are switching from one of the major ISPs to retain their customized settings when they switch ISPs.

Mark Kasiraja, Esaya COO, says that maintaining the product is not easy. "I think that's why nobody's trying to imitate us," he says.

The company's solution is sold on two plans: if you "pay as you go" you pay $10 per user down to $4 per user. If you prepay on volume, the company will discount your rate as far as $2 per user.

With several large ISP customers (but not AOL) the company provided us with the following churn data for Q1 2004:

To make sense of this data, we need to use market share data. ISP-Planet calculates market share as information is filed with the SEC in our Subscriber Rankings. Our data is as of Q3 2003, and the SEC filings this month will only bring us to Q4 2003.

Nevertheless, we can draw some broad conclusions. AOL and MSN are in serious trouble, experiencing churn far above their market share. Earthlink, United Online, and SBC Yahoo! are experiencing churn in line with their market share. Only Comcast and the "other" category are experiencing below average churn.

Since the "other" category is so broad (it includes the majority of cable and DSL providers), that means that independent ISP churn rates are far below the industry average.

(Note, however, that ISP-Planet's "other" category includes the market share of AT&T Worldnet, which did not disclose subscriber numbers.)

When we last ran the numbers, we calculated that the market share of independent ISPs is about 34.7 percent. Even if all of the churn in the "other" category is churn away from independent ISPs, they are experiencing churn rates of one-third the industry average.

That's good news for the independents.

It also raises another question: what's the average churn rate for the industry? Sadly, we do not have these numbers. We will update the ISP rankings this month, and when we do so, we will print churn rates where they are listed in our notes.

But don't hold your breath. For most ISPs, churn rates are a secret the company is trying to hide from Wall Street. Confident ISPs, such as Covad, United Online, and Earthlink, are declaring churn rates, but others are not. MSN and AT&T Worldnet are not even declaring subscriber numbers (however, we expect MSN to declare subscriber numbers in Microsoft's annual report even though it has not declared subscriber numbers in quarterly reports).

That AOL has customer retention problems is not news to any ISP. The industry knew about the opportunity here long before we published America Online's Weakest Link in 2001. Shortly after ISP-Planet was founded (in May of 1999) we ran the article Cleaning Up After AOL about the mess that AOL leaves on subscribers' computers.

One way to clean up that mess is to use TrueSwitch (but many ISPs have, by now, learned to clean up AOL's mess for their customers, especially those that also run a computer repair shop). For more about TrueSwitch, see The Pitch to Switch.

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