Perhaps you've recently the '90s version of matchbook-cover ads extolling a variety of get-rich-quick schemes. In today's ads, a smug bald guy standing next to a Rolls Royce trumpets: "Be part of the billion-dollar industry that is connecting bulletin boards, corporations and individuals to the Internet!"
Your attention is immediately captured. The ad continues, "Someone's making millions... shouldn't it be you? Only $99.95! Complete manual details how to become an Internet provider!" You snicker, glad that you're not that gullible--but, still, there's a nagging feeling that you might be missing out on something.
Certainly, the statistics documenting the Internet's explosive growth continue to appear with mind-numbing regularity: traffic on the World Wide Web (WWW) last year increased 1800 percent, one major provider of Internet connectivity (Sprint) saw its traffic increase 700 percent last year and is bracing for an 800 percent increase this year, hoping that it has not underestimated the demand. By 1998, Forrester Research predicts 11.8 million Web users, outpacing the users of conventional online services (CompuServe, AOL, Prodigy), which will peak at 6 million. Goldman-Sachs estimates the Internet market will grow ten-fold from 1994 to 1998, reaching $3.7 billion. Compared to the stagnant growth of much of the computer industry, the Internet is a market that can't be ignored.
So who's making money? Last year in this publication ("The Internet: Here Today," by Ray Valdes, DDDU, August 1994) I said tool vendors and Internet access providers were making money, as opposed to those selling content or (to a lesser extent) physical goods. Before looking at the provider business, let's review what's been happening in the content/goods arena and the tools marketplace.
Although Web sites continue to proliferate, many clueless content providers are putting up pages that resemble repackaged annual reports and recycled marketing brochures, rather than offering information of genuine value. Unfortunately, this kind of banal material has made the transition from hard copy to electronic media with its sleep-inducing qualities intact.
A few content publishers are finding success--not in dollars, but in "hits-per-day." The Web sites for Playboy and Penthouse are neck-and-neck for first place in number of accesses (on a good day, each can rack up 800,000 hits). In third place, Wired magazine's popular HotWired site reportedly gets 400,000 hits per day. (A "hit" can be a misleading metric because it depends on the graphical content of the page; each graphic counts as a hit. To get the number of actual users visting a site, you need to divide the hits by a factor, say between 3 and 6, that depends on the characteristics of the site.) Reflecting its popularity, HotWired recently raised its ad rates to $15,000 per month.
Other publishers are still testing the waters, leading to some information-economy bargains. You can, for example, conduct free full-text searches of the Wall Street Journal at http://wais.dowvision.com. Compare this to accessing the same database through Dow Jones Information Service, at $100 or more per hour.
A few content providers are seeking to score big, either through chutzpah, greed, or plain ignorance. ESPN is launching a Web site with Paul Allen's Starwave Corporation and reportedly asking corporate advertisers to commit to a $1 million one-year sponsorship. These steep fees have elicited tsk-tsks from some advertising executives, one of whom commented: "Let's provoke use by being affordable." (Advertising Age, March 20, 1995). The rush is on, but no content publisher has struck gold yet.
On the heels of America Online's $30 million acquisition of Booklink Technologies (creators of the Internetworks browser), TCI's investment of $125 million for 20 percent of Microsoft Network, and PSI's $10 million purchase of wet-behind-the-ears Pipeline, you can see that some serious money is being spent on tools as well-heeled corporations chase the apparitions of the present and future information superhighway.
But before you download the Mosaic source code and see if you can do a better job than Spry, be aware that it's probably too late to get into the browser business. Netscape Communications has established clear dominance in that category, and the personal-use version of its Netscape browser is free. One Web site tabulated its browser usage and found that about 80 percent of its net.surfers used Netscape, 10 percent used Mosaic, 7 percent Lynx (a text-mode browser for those with shell-based dialup access), and 3 percent for other tools.
For competitors, the Netscape browser is a moving target. The company has in the last few weeks made available Netscape Version 1.1 beta, which adds new features on top of the existing proprietary HTML extensions. These features include support for tables, "dynamic documents" (in which a page gets automatically reloaded every few seconds, to allow for simple animation), graphical backdrops (opening up a whole new mechanism with which neophyte designers can inflict graphical abuse on users who've now become immune to the BLINK attribute), enhanced security (using "non-exportable" encryption), and a client application API that provides access to the Netscape "engine" from third-party applications via OLE, DDE, AppleEvents, and X Events.
Several months ago, the headline in this publication stated "Web Wars Widen" (DDDU, January 1995). But in the area of browsers, that war is over. The new arena of competition will be, as industry-commentator Jesse Berst puts it, with "just-add- water" Web servers which encapsulate and simplify the presently tedious and error-prone process of configuring and operating a Web site. The supply of UNIX gurus is not growing as fast as demand for Web sites to administer, leading to an opportunity for those tool vendors that can rationalize the process. However, this choice is not for everyone. Those who cut classes at UNIX-guru school may wonder: Instead of selling tools or content, how about selling access? So we return to the question posed by the matchbook-style ad.
If you call up some of these ISPs, you are as likely to encounter a scratchy answering machine as to talk to the president (and chief bottle-washer) of the company. It is legitimate to wonder if your precious e-mail is sitting in a corner of his or her living room. In the case of one ISP, who has multiple T1 links (1.544 Mbps data lines) and provides connectivity for several countries in Africa, the e-mail reportedly does go through his living room. Another provider, whose Web site announces "We are a NATIONAL Service Provider" and lists 30 cities across the U.S. from which you can obtain access, only recently moved from a KOA campground where it was located. Then there's DC-area silkroad.com, which provides access, sets up Web sites for the military (the Air Combat Command server, which is classified but somehow available to the public), and "imports fine Asian art and Antiques and distributes fine art to experienced and knowledgeable collectors."
If you browse the Web site of Southern California vendor kaiwan.com, you'll find a price list with a wide range of services (ISDN, 56K, and T1 connections) at low cost. However, you'll have to sort out the grammatical errors from the typos first: "Prices is for referenced only and may be changed without notice... Below pricing does not include equipments... Our Dial- In service is equipped with 16.8k and 14.4k super high speed modems...KAIWAN uses Taylor UUCP system which supports aijGgfte protocols...Normal Personal Shell Account [allows] 1 Mega disk space with 4 Mega more temporary disk space."
And in case you're thinking of hanging out on a street corner with a sign, "Will provide bandwidth for food," then check out ISP forfood.com first.
Perhaps the weirdest page on a provider Web site is at The Little Garden (TLG), a Bay Area ISP. Founder Tom Jennings maintains a "Toilet Cam" at http://wps.com/toilet, so that you can, literally, "See if we give a s***". In a recent interview with the New York Times, however, Jennings maintained that the Toilet Cam is not really active, all you get is the same static image of an empty toilet. (Note also that wps.com is Jenning's personal site, while tlg.org is the official provider site.)
Lest you write off Jennings, be advised that his outfit is a major source of connectivity for many small Bay Area ISPs: including DNAI, ScruzNet, QuakeNet, LanMinds, Zoom, Zocalo, TDL, SlipNet, as well as popular sites such as wired.com. Unlike most providers, TLG has redundant links to the Internet backbone, via multiple vendors.
The connectivity food chain extends further from tlg.org, because Jennings does not restrict re-sale of bandwidth by his customers. TLG customer ScruzNet, for example, provides connectivity to several even-smaller ISPs, such as cruzio.com and armory.com. By locating further up the food chain, TLG avoids the vagaries of the fickle retail-consumer market. If you follow the discussions on the ba.internet and alt.internet.services newsgroups, you'll see that, from one month to the next, an ISP will go in and out of fashion, as customers search for the optimum mix of price, reliability and support. Among the cognoscenti, Netcom was popular a year or two ago, when there were few connectivity options outside of academia and large corporations. As it grew from 10,000 to over 40,000 in two years, Netcom alienated some early customers with busy signals, heavy traffic, billing problems, lack of support, proprietary access software (NetCruiser, which was buggy in its initial release) and relatively high prices. Some these customers went over to new ISPs, which have sprung up almost on a weekly basis over the last year. Each ISP arrives on the scene dressed up in attractive pricing and offering additional services, such as free home pages or custom domain names. It then becomes a hit for a while, until the load overwhelms its single server, and busy signals multiply.
At the moment, the Bay Area provider-du-jour is Best Communications (best.com) of Mountain View, which provides unlimited personal SLIP/PPP connections for $30.00 per month. In addition to home pages, and custom domain names, Best operates a storefront in which customers can come in and surf the net at full Ethernet speeds. My favorite ISP, however, is scruznet.com, because it is one of the few that provides unlimited-use dial-on- demand ISDN for only $75/month. I hesitate to mention this, because, like a favorite cafe or restaurant that gets discovered, I worry that soon I'll no longer be able to get in.
To make sense of all this, I prepared a table of providers and services. The list is by no means complete, and focuses, not on personal SLIP/PPP accounts (which have become a rock-bottom- priced commodity), but on mid-level bandwidth options, such as frame relay, leased line, and ISDN, in various flavors (full-time versus part-time, metered usage versus unlimited use, Centrex versus non-Centrex). This market is highly dynamic and prices are likely to change. Almost all providers now have Web sites listing their prices. You can find a listing of providers at http://www.dobbs.com/dddu/providers/. This list also available by e-mailing me at ray@valdes.com.
Since the mid-level market is not yet a commodity arena, you'll find tremendous swings in price from one vendor to another. For the same amount of bits-per-second, your two-year cost can vary by a factor of four, from about $6500 to almost $27,000. Don't take these numbers are gospel because they contain certain assumptions about equipment purchase and daily usage that may not apply to your situation. For example, I assume the part- time ISDN link will be active no more than 12 hours per day; I also assume that you can cobble together a low-cost frame-relay- capable router and CSU/DSU interface for $1000 (compared to $1750 quoted by one vendor and $3702 quoted by another); another assumption is that leased-line distances are short. Centrex is not an option for most vendors, except for QuakeNet, which is located in close proximity to the DDJ offices (and therefore shares the same digital switch at the telephone central office). If you're close to your ISP, ISDN Centrex becomes a very attractive option for avoiding the per-minute charges of regular ISDN, which can otherwise be more expensive than frame relay.
Netcom did go public a few months ago and its IPO went well. During the first few days, almost 2.5 million shares changed hands at an average of $18/share, climbing to $28/share a few weeks later. But Gordon Cook, an astute industry observer and publisher of the The Cook Report on Internet -> NREN (cook@cookreport.com), says: "I would be reluctant to set up an ISP business in a major metropolitan area in this country....There certainly will be a shakeout." It's not just competition among the regional small fry, there are "ominous rumblings" at the national level, as the national service providers (NSPs) such as Sprint, MCI, AT&T, ANS, PSI, BBN, and UUNET compete with each other along different fronts.
For a period of time, members of the industry consortium known as CIX (pronounced "kicks") tried to corner the connectivity market by restricting resale of bandwidth among their customers. However, last year, Sprint broke ranks and started providing low-cost connectivity to wholesalers without restrictions on resale (although this was never spelled out in the contract). This let to a spurt in growth among the small regional ISPs, like TLG and others further down the food chain. However, these policies can change at any time, and small ISPs be wiped out with an arbitrary stroke of a pen.
One hope that free and open connectivity will continue is startup Net99 Inc., founded by Joe Stroup and partners (http://www.net99.net). Although in existence less than six months with 28 employees, Net99 is on its way to becoming a national service provider. Stroup says: "We see ourselves as the reseller's reseller," adding that, unlike Sprint, Net99 will put the resale permission in writing.
Although such a contract gives you, as a would-be ISP, a measure of confidence, the situation is also likely to change. Assuming it is successful, Net99 will be the the only NSP that is not owned by a multi-billion large corporation. This raises the question of how long can such a startup last without its founders succumbing to the temptation of being acquired. Once that happens, the prospects for the small access provider are again up in the air. Don't buy the Rolls-Royce just yet.