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Are Independent ISPs Finished?

By Joe "Zonker" Brockmeier
Dec 4, 2002 4:00 AM PT

With more and more people adopting broadband, and larger national ISPs swallowing up smaller regional ones, one might think independent ISPs are on the ropes.

Are Independent ISPs Finished?

Bob Parker, senior analyst at AMR Research, said that may be true. "We may be seeing the age of the independent ISP going away over time," he told the E-Commerce Times. "From a consumer point of view, I certainly think that's a valid hypothesis."

I'm Not Dead Yet!

But others see a bright future for independent ISPs that have survived the industry consolidation. While many small outfits have sold out to larger concerns or simply folded, quite a few ISPs still are competing with the big fish for a slice of the market. In fact, some independents are actually growing their customer bases.

Kurt Brecheisen, president of GTI Internet Services in New Jersey, told the E-Commerce Times that it would be premature to count independents out completely. "Being here, being a good provider, has paid off because the others have come and gone," he said. "Staying power is the key."

Acknowledging that some smaller ISPs have vanished in a shakeout, Brecheisen insisted that his firm is hanging in there. "We're gaining customers," he claimed.

Likewise, Kirk Rafferty, CEO of Colorado-based Fairplay Communications, said that although giant ISPs might bring new users to the Internet party, those users eventually will jump ship and choose smaller providers. "We're not losing customers to the big ISPs," he told the E-Commerce Times. "In fact, I'd say that a large majority of our customers are disillusioned refugees from the big ISPs. However, where the big ISPs kill us is their ability to market to the masses."

It's the Services, Stupid

Indeed, Parker said that a large percentage of home users care only about getting online and having an e-mail address. A dial-up or broadband connection at the cheapest price fits their criteria nicely -- which often means they never consider smaller providers, often going straight to an industry giant.

"There's no novelty to it anymore," Parker noted. "It's hard for the independent ISP to make the right kind of distinction or to have some distinction available to them."

But for customers who want a little more, Brecheisen said, the independents do it better. "I like when my competitors get sucked up [by larger ISPs], because [those customers] lose all the little things the local ISP can do. The end user doesn't like that and shops for another guy."

Even customers who have switched to cable Internet access are not a lost cause for GTI. "We lost a few hundred dial-ups to cable, but we're finding that [some] people are keeping their dial-ups as a backup to cable," Brecheisen added.

Rafferty said that, above all, smaller ISPs provide better customer service. "People are actually amazed at the difference in the way we treat them, as opposed to how they're treated at the big ISPs," he said. "In fact, customer service is the number one thing we have over the big boys. They simply cannot compete on that level."

The Future for Independents

According to Brecheisen, GTI's focus is mainly small and mid-size business customers, and that is the way of the future for the independents. "We're not actively pursuing the consumer," he said.

And the situation appears stable for the time being. "[There are] no new threats coming down the pike," Brecheisen said. "We've gotten over the cable hump and lived through that.... Until there's some other groundbreaking technology, we're [just] going to do what we do."

Rafferty is optimistic that Fairplay and other independent ISPs will remain players for some time to come. "Although the market has been harder to play in for small ISPs, I'm optimistic that as new Internet users become experienced Internet users, local ISPs will experience a revival," he said. "I believe that the large ISPs will continue to gain the new user space, but those new users aren't going to want the hand-holding forever. They're going to want the options that a big ISP just can't provide."

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