The Future of ISPs

Internet Service Providers (ISP) frequently have to face the question as to how they can protect their existing business and, at the same time, remain profitable in the future. For, on the one hand, the strong concentration process drastically shrinks the margins of pure access providing. New competitors, for example the major telecommunications companies, are flooding the market with ever cheaper offers. Prices continue to fall. And customers, who are becoming more and more “literate”, are now designing their own HTML pages. To quote a study issued by the European Union (EG DGXIII.A3) ISPs will not survive in the long term if they do not provide add-on services such as consulting or electronic publishing.

Quo vadis Internet Service Provider? (2000)
http://www.siemens.de/servers/isp/isp_us/quovadis.htm (April 25th, 2000)

Moving with the Times – Into the New Millennium

The Internet has come along way in the last few years and many small to medium sized Internet Service Providers have prospered because they were proactive to the changes faced in the market. The original dial-up access only ISP offering limited services are all but extinct, replaced or evolved into newer Internet Service Providers offering a range of services for the business market.

Past and current issues of the Internet have in effect shaped these businesses into companies offering full Internet Business Solutions to the local and international community. VISPs and virtual hosting have become common integral components that have made up the small ISP and security issues have all been out-sourced to the Tier 1 providers of the industry. It has approached the stage that these large Tier 1 providers, usually multi-international Telecommunications organisations, have become the mainstream network provider allowing the smaller ISPs to specialise to the specific service offerings for their customers.

In 1993 there were about 90 ISPs in the U.S.,” said Eric Paulak, senior Internet analyst with the Gartner Group in Stamford, Conn. “Now we’re over 4,000 but we think in the next five years that number will shrink to 500.

Abate, T (1997) The Fuzzy Future of ISPs
http://www.computernewsdaily.com/232_082097_110001_28437.html (April 27th, 2000)

Predictions have been made by many different groups of people about the future growth of Internet Service Providers. Many believe that the ISP business will consolidate as drastically as the telecommunications industry did leaving only large multinational players on the market. At the other end of the argument are those who believe the consolidation will be offset by the new ISPs that have been starting up at an increased rate over the last few years. Therefore even though many ISPs will merge and grow in size, it will still be relatively easy for new entrants into the market keeping the number of ISPs growing for a long time.

These ISPs still need to stay in business and with new technologies just around the corner. Technologies such as ADSL faster cable and digital connections and of course the newest impact upon the industry, WAP, these Internet providers need to be ready to change their business in order to suit their customer’s needs.

Internet Services of the 21st Century

ISDN (Integrated Services Digital Network) connections have been around for a while and most Internet Service Providers have been able to offer this connection service to their customers in the past. However newer connection protocols have already been launched such as ISDN 2 offering much greater transmission speeds and the most recent impact on the Cable / Telecommunications companies, ADSL.

ADSL stands for Asymmetric Digital Subscriber Line. It is new technology developed to drastically increase the speed at which you are able to download information from the Internet. ADSL uses your existing phone line. One major benefit of ADSL is that you can place a phone call and surf the Internet at the same time.

Tek Interactive Group (2000) Whats New – ADSL Access
http://www.tekinteractive.com/articles/911602340.html (April 25th, 2000)

This new technology basically allows an increase of at least five times the speed of a standard 56K (Current Modem) connection. However the main advantage of such a connection is that it is in effect a permanent connection to the Internet as no dial up connection is required. ADSL is already starting to appear in the UK throughout several different Cable and Telecommunications companies.

Does this basically mean that this connection side of the industry has been completely closed off for the standard small to medium sized ISP? It is hard to determine at the current time whether or not reseller options will be open for these businesses, as the technology is so new on the market.

In recent months, WAP has become a buzzword that most people have heard of throughout the UK and Ireland, especially with the recent news coverage concerning the licensing of UTMS technology to mobile phone companies. Over twenty billion pounds has been spent on this technology by five telecommunications companies for acquiring this license. UTMS basically enhances further the current WAP technology through vast increases in speed of voice and data transmission.

WAP stands for Wireless Application Protocol, which basically bridges the gap between the mobile world and the Internet offering numerous mobile value-added services to subscribers. WAP is a global standard and therefore any connection through WAP no matter what network is used, will be able to take full advantage of the services offered.

The mobile phone industry as a whole has grown significantly in recent years. In fact in the last year alone sales of mobile phones have accelerated dramatically to both end users and businesses. WAP will allow additional benefits to the end user through secure access to relevant Internet information and services such as messaging, banking and entertainment all through the mobile phone.

It is expected that Internet Service Providers in the future years, even the future months will exploit the true potential of WAP. However is this technology also only open to the larger corporate ISPs within the industry? Currently five major telecommunications companies have invested a substantial amount of money in licenses for the future UTMS standard, but what does this mean for the smaller Internet Business in years to come? Unless in future years this technology is made available to the smaller business provider perhaps through reseller packages, these larger corporations will essentially become the mainstream ISPs through WAP technology It can be argued that this is merely another access service through which smaller ISPs are already redundant and are constantly looking for other service opportunities.

VoIP (voice over IP – that is, voice delivered using the Internet Protocol) is a term used in IP telephony for a set of facilities for managing the delivery of voice information using the Internet Protocol (IP). In general, this means sending voice information in digital form in discrete packets rather than in the traditional circuit-committed protocols of the public switched telephone network (PSTN). A major advantage of VoIP and Internet telephony is that it avoids the tolls charged by ordinary telephone service.

VoIP (voice over IP [Internet Protocol]) (2000) http://www.whatis.com/voip.htm (April 25th, 2000)

Voice Over IP as stated above is basically another form of communicating with people across the world through sound transmission. In effect, instead of making a phone call, people can now communicate across the Internet at the local rate instead of paying higher international tolls through their telephone company.

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Development of the Internet & Service Providers

Online organisations such as Yahoo and AOL have had Instant Messaging services available for some time now, but only recently have they added the additional service of voice over the system. Both AOL Instant Messenger (AIM) and Yahoo Messenger both have this functionality as standard. Other companies are now starting on the internet such as Net2Phone and Dialpad, have started offering Internet phone calls through their business from greatly reduced charges to free service!

VOIP is still a relatively new service and will no doubt cause more concern to telecommunications companies such as British Telecom, as long distant call charges could soon be a thing of the past. Again, however, the small to medium sized ISP will not be able to offer these services directly and only larger network carriers will be able to offer such reductions.

It has been a while now since Freeserve announced completely free Internet access with only a local call charge to pay. However, recently both NTL and Altavista both announced completely free unmetered calls to gain access to the virtual world.

NTL will be the first major company to launch a genuinely free internet access service. It is part of ntl’s vision to be the UK’s leading complete communications company. Since the internet was invented, genuinely free access has been talked about as the force needed to bring the internet into every home. Well, now all the talking can stop. Every ntl residential telephone customer will soon be able to enjoy free access.

Free Internet Calls (2000) http://www.askntl.com/freeinternet/default.asp (April 27th, 2000)

As they stated, NTL now offer free local Internet access to homes across the UK and Ireland. NTL do however require that the user is a customer of theirs before offering the service and they spend at least £10 per month on telephone calls to qualify for this offer.

The other company that recently announced completely free access was Altavista who have announced that their free unmetered Internet service will be available soon at a one off set-up charge.

AltaVista UK users will soon have the opportunity to register for the service called “AltaVista Internet Access”. Although there will be an initial set-up fee and an annual renewal charge, there will be no metered call charges.

Internet Access from AltaVista (2000) http://www.altavista.co.uk/company_info/about_av/av_access.jsp (April 25th, 2000)

Soon to follow trend was British Telecom who already currently offered several different packages for weekend and off-peak rate calls, but would offer an improved service of full access anytime for a reduced cost.

There have been discussions for some time now over the issue of free Internet access. OFTEL, the governing body of the telecommunications industry within the United Kingdom, has in recent years put more pressure on BT to offer free Internet services. This pressure has been originated mostly from the general public, who have realised that access to the Internet should be unmetered as it has been in the US for many years.

Although this dissertation has dealt mainly with the small to medium sized ISP offering services to local business across the UK and Ireland, the fact that the public has raised the pressure on free access has and will have major effects on many small service providers. Most small providers would not have the resources to offer free-call access unless through a VISP as mentioned earlier and since at the current time there are only a few organisations offering this service, the option would not be open to them. Most smaller ISPs have however diversified into alternative service providers, so for these businesses, free-call local access from larger network providers should not have a great impact on their profit margin.

But what about the other technologies mentioned earlier? It has become apparent throughout the development of Internet Service Providers that much of the business has focused on reselling opportunities. Perhaps many of these new services will be a point of referral in combination with specialised services the smaller ISP will have to provide to remain in business.

21st Century Internet Service Provider

This issue has already been emphasized as a major strategy for the small to medium ISP to continue in business today. It cannot be stressed enough of how important it is and will become for these small businesses to continually monitor for those newer opportunities keeping ahead of the competition.

Eventually, the larger commercial network providers will consume the majority of direct access to the virtual world through direct and indirect reseller services. These larger commercial bodies will no doubt comprise mainly of the telecommunications companies currently reaping from profits of long distant communication carrier services. Through analysing the trends of the market, it has become apparent that the small ISP cannot survive on access services alone. In the same way large commercial telecommunications organisations will not be able to survive alone on telephone access to long distant services. The future of Internet service providers will have to be these larger network providers who will also have to change and move with the demands of the industry. Mobile phone companies such as Orange and Vodaphone who both along with three other major players won the licenses to UTMS through WAP technology, could in essence be the ISP of the future.

The small to medium sized ISP we know today may no longer be able to use the term ISP to define an access to the Internet. Then name may stay the same, but the services may get to the stage that these companies may have absolutely nothing to do with Internet Access. The services they offer will diversify into consultancy and a range of other Internet based services for the end business customer. The access providers will consist mainly of the commercial network providers referred by these smaller consultancies that will offer all the access needs of the client.

The Future!

The popularity and recognition of the Internet originally came from the amount of small to medium ISPs throughout the USA and eventually the rest of the world. It appears the future of the Internet will reside with the large telecommunications industry giants acquiring many of the existing ISPs.

It is very difficult to predict the future, but following the trend of the evolution of Internet based companies, the future may become clearer. The existing ISPs have had no choice in the past but to diversity and change within the market in order to survive. This change must continue and eventually these small organisations will evolve into consultancy agencies offering advice on a smaller scale to businesses. Therefore the telecommunications giants of the present time, especially with regard to the mobile phone companies, will eventually become the ISPs of the future. The ISPs of today will become the consultancy agencies offering reseller services from larger organisations and building a customer portfolio through diverse services offered.

However fast the Internet has grown in the last few decades, it is still in a very young phase. WAP, ADSL, VOIP and other new services are just the beginning. This is a very exciting time to witness exactly how the future of the Internet will be shaped, but one thing is certain, the Internet of tomorrow will be the result of the achievements made by both large and small companies alike today.

Image Credits: Photo by Isis França on Unsplash.

Series Navigation<< ITS Internet Case Study

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