ISPs (Internet service providers) are faced with new challenges every Web-minute. Witness new entrants into the Internet market from every direction, constant technology changes, "free" service providers, dropping service costs, tightening margins, and higher customer expectations.

Many owners of small and midsized ISPs are questioning whether they have a future in the Internet business. Microsoft announced in early August that it is considering providing free Internet access. There are also free Internet PCs, free e-mail, and free Web hosting. The Internet is free! But surviving in the land of the lost profits is a challenge. This is exactly what "balance sheet ISPs" (those ISPs that actually intend on being profitable) are struggling with.
Every day new competition enters the game: PC manufacturers, software companies, discount retail stores, national providers, and local providers. There's a POP on every Internet corner. All of the players launch with products, services, and technology they think will be the most profitable--access, hosting, mail, on-line applications. Dial-up 28.8K access was the only option until 56K came about (requiring the replacement of every port). Now, just as the equipment is being paid off, xDSL is rolling across the country and forcing equipment replacement once again.

The impact isn't fully realized until the "more-for-less" ratio (and expectation) is detailed. It's not just "cheaper" in many cases, it's quite literally "free."
How does the little guy (or the big guy for that matter) survive? I was told "to remain viable in the ISP market space, one would need to install superior infrastructure to embrace new standards currently under development. That one would further have to divest the return-on-equity model in exchange for a broader market-reach model encompassing metrics, such as reach, subscribers, and hits."

What, you say? If you would like to save time and money on that consultant, the translation is as follows: Spend all the money you can on new buzz-word technology, hire highly experienced (and expensive) tech support so it might worm and then, if it does, give away the service for free.

Even if you can understand how a "standard under development" is a standard, this model doesn't pay the bills. Today, there are companies like us that provide free Web hosting as a part of xDSL service packages--but there are also companies like Hiway Technologies (hiway.com) that provide hosting at premium prices. Just as there is hotmail providing free e-mail (hotmail.com), there are entire companies built around outsourcing e-mail for a fee. There are also free Internet access companies and those that charge a premium, such as USA.net.

In the frictionless Internet world, this disparity can't be due to customer ignorance. The price (or lack of price) is only a mouse click away. These profitable companies exist because they provide a service clients can understand, incorporate into their daily lives, and depend upon. These are services worth paying for--services that make our lives better.

The "secret" is being an opportunity sniper. Choose the business you're going to be in (e.g., Internet access) and create a differentiating factor (e.g., high-speed DSL) with a product and/or service(s) that makes you the best (price is not an acceptable differentiator), and then bundle the other products and/or services (e.g., e-mail and Web hosting) as an added bonus (cheap or free) that completes the service offering for a total solution.

Then work only with companies that are well suited to consume your product/service, that have people you enjoy working with, and that understand the issues in delivering and consuming the product.

In no other industry is the phrase "You get what you pay for" so appropriate. The Internet service provider in the new millennium will provide a superior service defined by reliability, accessibility, performance, and ease of use. For this, the ISP will command and be rewarded with paying customers. No business can provide superior technology, service, and support forever without a profit. Those that continue to attempt to do so will disappear on the banner ads that they flew in on.