The Internet Service Provider

Note: some of the info below is now a bit dated, it was written end 1996 and the internet scene in NZ changes so fast that a few inaccuracies have crept in.

What is an ISP? (and an IAP?)

(This assumes a knowledge of what the Internet is!)
Some possible definitions..
An Internet Service Provider (ISP) is an organisation that provides a connection service for customers to enable them to connect to the Internet. Customers may be anybody from home users to companies to large corporate organisations.
In its most simple form the ISP will have dial in telephone lines connecting to modems that in turn connect to the ISP's computer. This computer will provide an operating environment for dial up users to use the services of the Internet via some type of data connection the ISP has to an Internet connectivity provider (or another ISP).

Recently a new term has appeared to distinguish between internet providers that provide customer support and those that do not. The Internet Access Provider (IAP) in now used to broadly describe internet providers that do not provide some of the user training and general support that has come to be expected by users. No exact definition for each term has been agreed upon and it is generally left up to service providers to decide which best fits their operation.

Why would I want to be an ISP?

Well really only you can answer that question :-)
People who become ISPs do it for all sorts of reasons, some weird but most for the opportunity of running their own business in the quickly evolving area of computer based communications technology.
Of course some just see a possible opportunity to make money, however for most new ISPs this is a goal that may happen some time in the future.

From an nz.general posting in 1994
If you get serious about being an internet provider then you should forget any ideas about making a pot of money in a short time. The internet may be pretty new(ish) but unlike other business ideas its not just a matter of being one of the first, investing some modest amount of dollars then waiting for the profits to roll in. If thats what you expect then go invest in some seed potatoes.
 From an nz.comp posting in early 1995
The main buzz I get out running an internet bbs (an ISP) is meeting new people. Over the last two years I have made many new friends and my experiences have all been good (so far). Its just a pity there are not too many other bbs getting connected to the internet.

From news postings and other comments/stories from ISPs the list below of pros and cons were noted.

pros:
a lot of fun, if you have a somewhat warped sense of humour,
a roller coaster trip when things and $ really start to move,
an education in running a business (or how not to!),
learning about computers, communications technology, unix, routers and lots of real fuzzy technology things,
a big ego trip, if you need to impress people,
an opportunity to make lots of new friends, (or enemies!)
a way of showing off your benevolent and kindly nature,
proof that you really want to support your community, schools, clubs, societies etc.,
running your own business!
you really enjoy taking on the Telecos and proving you can do a better job at running an ISP.

cons:
a major drain on your financial, emotional, family and health resources,
a simple way of adding to NZ Telecom's $700M profit per year, (aka realising that as an ISP you are merely a collection agency for Telecom/Clear/Telstra),
an introduction to the legal minefield closing in on ISPs,
getting people to pay up and you paying out some horrendous bills,
running your own business!

It can be fun just writing down the reasons you have for being a wannbee ISP. If they have anything to do with making lots of $ or becoming an overnight major force in the ISP business then it may be a better idea to seriously consider that trip to Disneyland for your family instead.
At least at Disneyland you will experience more of the real world even if it is only for a short time.

On the other hand if your listed reasons have the words fun, need a real buzz, need to learn, need something to do instead of thumb twiddling, have a boring life, don't mind blasting a few thousand $ or you are a bit weird then by all means a life as an ISP could be just for you.

ISPs in New Zealand

What makes all the current ISP different from each other? Most people would measure the differences in the prices they charge and the services they provide. But, like most businesses there can be a wide variety of other factors that make the ISP what it is.
The larger, national ISPs, or at least the ones that advertise themselves as national networks, (even though this can often be wishful thinking), tend to want their business from the expanding home user market. In New Zealand this market is growing much faster than any of the other Internet market segments and subsequently is the most cost competitive. These ISPs will usually not turn down other business but in the non-home user market they tend to be less competitive. These national ISPs seem to have two methods of providing Internet services to the various parts of New Zealand.
The first is to use Telecom 0800 and/or Clear 0508 numbers allow dial in from anywhere in the country to the ISPs main hosts. The second is provide some point of presence (pop) in as many of the major population centres as possible. Often a combination of both is used. The pop can be a full internet system with all the normal internet services or it could be nothing more than a terminal server connected to a digital data service which in turn connects to the ISPs main site.
The larger time charging ISPs such as Clear's ISP, Telcom's Xtra ISP and Voyager all use some combination of 0800 and local pops.
It is worth noting that the Telcos (NZ Telecom and Clear) that are now ISPs will obviously take advantage of their own 0800 number services. This has led to accusations to the Commerce Commision of unfair business practices when ISPs such as Voyager pay more per hour for an 0800 number than the per hour time rate that Xtra charges its own customers.

AT the next level are the ISPs with semi-national organistaions, either an ISP with multiple pops or groups into cooperating collectives with varying degrees of centralised control. These ISPs tend to be flat rate or fixed rate for users with all sorts of modifications and special cases to their charging structures.
Interestingly, Ihug, the first ISP to implement fixed rate prices, have been recently expanding into more areas in New Zealand either by opening a new pop or combining with an existing ISP that covers a specific area. Ihug have also been attempting to control the activities of other ISPs when they advertise 'flat rate' pricing, when the details of that pricing are not what Ihug consider flat rate. The saga continues.
Other ISPS at this level who appear to look at the home user market as the main source of users (and revenue) are Actrix, Iconz, Iprolink, Planet NZ and Planet FreeNZ. Actrix is one of the first ISPs in New Zealand, generally covering the Wellington area (KCCS was the first ISP in Auckland). These ISPs number their dial in lines in the hundreds and apart from Actrix which connects to Iprolink all the others tend to be hubs with multiple other ISPs and businesses connecting to their network within New Zealand. KCCS is also an ISP that provides internet connectivity throughtout the North Island of New Zealand (with 90% of the population) except KCCS does not market its services to home users, instead concentrating on providing connectivity to ISPs and businesses.

These collectives of ISPs have often come about as a necessity for survival. The economy of scale in purchasing internationl internet bandwidth can be very significant. There are probably very few ISPs that have not yet joined one of these cooperatives although further cooperation can be expected as more smaller ISPs start to see the Telco's ISPs as competition in their area of New Zealand.

Most startout ISPs will take income from anyone prepared to pay for Internet services. In the larger cities the startout ISP may have a very difficulty task trying to attract the home users where the competition is large and profit margins per user are already pretty thin.
Competing only on price would be near impossible. A startout ISP would have much difficulty surviving on the tight margins unless they could attract several hundreds of users within a few weeks. This just does not happen.
Instead the startout ISP has to look at other areas of speciality. The services provided and the standard of support both become major selling points. The larger ISPs seem to concentrate on pure internet connectivity via PPP and SLIP logins. Smaller ISPs can offer other services such as email only accounts, dial up uucp accounts, shell logins, news reading only accounts as well as PPP connections.
One major advantage that the smaller ISP seems to have is some users prefer more personal contact for support and problem solving. New users who may also be new to computing like this type of personalised service and often will be prepared to pay for it. It seems to be a trend that the larger the ISP is the less effective and useful are their ongoing support and help desk facilities (ok there are exceptions). To survive the small ISP will make this personal support a major selling point. If prices are not too far away from the mainstream ISPs then the support factor will become important.

When the two main telcos in New Zealand started up their own ISP operations the NZ computer press reported that the costs were in the millions of dollars and software development times were from 3 to 12 months.
With all these resources neither of the telcos appear to have entered the NZ ISP market with either an impressive or successful service. More surprisingly neither of them appear to have used any of the people in New Zealand that have been involved in the last five years of Internet growth in NZ.
The continued public reports of problems and disasters with Telecom's Xtra reads almost like a comedy farce. However, with the massive financial backing of Telecom, Xtra will get better. Making a profit does not seem to be an urgent requirement as Telecom management have already stated they do not expect Xtra to make a profit until at least 1998.
So where does this leave the smaller startup ISP? Is it worth getting into the ISP business now that the Telcos are here as well?
This question is one many existing ISPs are wanting answered as well.
The answer for the startup ISP is to carefully consider your user catchment area, investigate what is available there now, and can you get some economic model together that would allow you to compete with these time charging larger ISPs?
Also, if you can get connected to one of the existing cooperatives of ISPs then find out everything you can about the cost of connecting to their nearest hub and the pricing of internet connectivity.

Summary of ISP types:

International:
  • Compuserve, time charging, most expensive. Only a few dial in points in New Zealand, could have additional cost of a toll call.
    This was the first major ISP available in New Zealand appearing in the late eighties. Most major businesses in NZ and many private users joined Compuserve.
  • IBM, pops in the three main centres, Auckland, Wellington and Christchurh, slow 14.4 modems, time charging, large base of usenet newsgroups.
    Never really made the impact that many thought it would when first introduced.

    National:

  • Telcos and 0800 number service users, practically always time chargers, expensive for anything more than a few hours per month, so far services are limited and support is lacking. However, they are slowly improving as lessons appear to be painfully learnt.
  • Larger ISPs with pops througout NZ. These can be one or some combination of time charging, data charging or fixed rate or flat rate pricing. These tend to be ISps that have been in business for several years and are well established.
  • Smaller ISPs, tend to provide a service for a clearly defined geographical area (city or free dial zone). The most common charging model is some variation on fixed or flat pricing with additions for data and time. These ISPs have to be quite creative with their pricing to compete with others. Big advantage is more personalised support and local area knowledge which create user loyalty (outside of major cities which are well serviced by many small and larger ISPs and have special pricing with Telcos).

    Some general idea of current ISPs in New Zealand can be obtained from the irregularly published NZ Internet FAQ. . Not all ISPs subscribe to this FAQ as it has had some doubts cast on the accuracy of the information published and was seem by some ISPs as a marketing tool (hence contained exaggerations and blatent fibs designed to attract users)

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    Last modified: 13 August 1997.