Business-to-Business or All Things to All People

One of the major strategic decisions that CLECs must make when becoming an ISP is whether to focus on customers or clients. Will you be focusing solely on business customers (however we may define them), or will you be offering consumer/residential services? These are significant decisions and should not be taken lightly. In this article, we will explore the benefits and disadvantages to both approaches. Neither approach is right or wrong. What is important is how your approach fits-in with your overall strategies.

Implications of B-to-B and Consumer Internet
For the purposes of this discussion, I am limiting this topic to Internet access services and purposely not including hosting, security, or other value-added services. These will likely have little impact in your ultimate decision.

Consumer services generally will include dial up (including modem pools), lower bandwidth DSL, and ISDN. In addition, e-mail and news servers are expected to be a part of the offering. Business services may or may not include dial-up or ISDN, and are more likely to include both symmetrical and asymmetrical DSL. For clarification, symmetrical offers the same bandwidth in both directions whereas asymmetrical differs. For example, some providers offer a 1 Mbps X 3 Mbps ADSL service. In addition, a business focus will provide dedicated connections terminating directly into your router facilities.

Operating a Network Operations Center that focuses on consumers will require greater staffing especially in non-business hours than a NOC focused on dedicated connections and businesses. This will lead to substantially larger costs of operations. In addition, operating dial access ports are more troublesome than dealing with dedicated connections. This implies the need for a more extensive engineering staff to be on call, including off-hours.

On the other hand, consumer services can be quite profitable as the numbers grow, and can be a vehicle for sales of other value-added services. Additionally, in some cases, consumer dial-up services can lead to business sales.

Early pioneers in the ISP business like Sprint and ANS purposely chose not to offer dial-up thinking that there was little money to be made for too much effort. That opened the door for smaller and lesser-known companies like PSInet, UUNET, and others to capture substantial market share in BOTH consumer and business services. ANS is long gone, having been acquired by AOL, and Sprint uses Earthlink as its dial-up partner. PSInet is still alive and well and UUNET continues to prosper as part of Worldcom. The lesson is clear - consider your choices carefully!

Decisions! Decisions!
Which focus is the right one for you? Of course, the answer is "It depends." Start with your CLEC business plan. Is your focus to wire office facilities or to compete with or provide cable television services?

If your focus has been strictly business, it may make the most sense to maintain that approach. Your sales force already knows business processes and can easily add these products into their portfolio. If it appears that dial-up services are important, rather than building them yourself, consider outsourcing to a partner.

Many of the major backbone ISPs have Virtual ISP programs that would allow you to offer dedicated services directly but use someone else for dial-up. Another advantage to this approach is that your prospective partner likely has hundreds of POPs throughout the US and perhaps internationally. How long would it take you to replicate that effort? You can always migrate customers back to your own services at a later time when it seems desirable.

If you are already serving consumers, dial-up residential Internet services seem a logical and required extension. It is likely that your business is already experienced in dealing with consumer-quality service and response. The transition should be far less traumatic than to CLECs used to dealing with businesses only.

For CLECs that do choose to offer consumer services and even those that wish to offer businesses dial-up access, you may wish to consider partnering with I-Pass (www.ipass.com) or GRIC (www.gric.net) . Both allow your customers to "roam" outside of your coverage region and still be able to access their Internet accounts. This increases your value and competitiveness.

Be True to Yourself
There are several important messages in this article. The first is that deciding up front on your target market for Internet services is critical. It can have a substantial impact on your relative success. Secondly, most successful businesses stick to what they know and can do well. The same is true with Internet services. If you know consumers, great! Internet should fit well. If you do not, you may find the challenges more than you anticipated.

Lastly, this is not a "black or white" issue. It is possible to serve consumer or business markets through external partners as a way to get started. This saves the capital expense required and allows you to test the waters before you leap in.

Before you may your final determination, consider your business focus, the capabilities of your organization, and the scope of the market opportunity. Armed with this information, you can make a clear, decisive, and informed choice.

Joel Maloff is founder of Maloff Group International, an Internet business consulting organization. Maloff has been an executive in local exchange and interexchange telecommunications since 1973, and has been involved in various aspects of the Internet since 1987. Maloff is the author of four books and hundreds of articles regarding Internet.