From competition to unhappy customers, the business venture that once seemed certain to succeed can quickly test the will of even the most battle-hardened and tech savvy business owners. However, there are ways to make the road to profitability a little smoother.

1. Make Sure You Have an Easy Customer Base to Grow into — Perhaps 500 households before you start building out. Yes, you can do it for less, but 500 is sort of a magic number where you can pay yourself and perhaps some hired help so you can be profitable and take a day off. WISPs and ISPs with 100 customers are great, but, at that size, they will remain a hobby that you may not be able to unload a couple of years down the road.

2. Set Boundaries from the Start – When starting up a new service, don’t let your customers run wide open. You may be OK without putting rate caps on users when you have only 10 customers sharing a 10 meg link, but when you get to 100 customers sharing a 10 meg link, you’ll need to put rate caps on them all. The problem with waiting is that your original users will become accustomed to higher speeds and will not be happy with sharing as your business expands – unless you enforce some reasonable restrictions up front.

3. Keep Your Network from Locking Up — Many ISPs believe that if they set maximum rate caps for their users that their network is safe from locking up due to congestion. However, if you are oversold on your contention ratios, you will lock up and simple rate limits are not enough. Don’t make this mistake.

This may sound obvious, but let me spell it out. We often run into operators with 500 customers on a 20-meg link. They then offer two rate plans — 1 meg up and down for consumers and 5 megs up and down for businesses. Next, they put rate caps on each type of customer to ensure they don’t exceed their allotted amount. Somehow, this is supposed to exonerate the operator from being oversold. This is all well and good, but if you do the math, 500 customers on a 20 meg link will overwhelm your link at some point and nobody will be able to get anywhere close to their “promised amount.”

If you are oversold, you will need something more than rate limits to prevent lockups. At some point, you will need to go with a layer-7 shaper such as Packeteer or Allot NetEnforcer. Or, you can rely on equalizing technology such as that found in NetEqualizer. Your only other option is to keep adding bandwidth.

4. Be the Reliable Alternative — If you are in a dense metro area, and have the resources, you can offer Internet connections to hotel and business customers with pay-as-you-go services. Many hotels and businesses have unreliable connections, or none at all.  Obviously you’ll need real estate across the street, but once secured, you can point a directional antenna into the building and give your signal a recognizable name so your users will connect. Then, offer them the connection for a daily fee. For many users, paying a small daily fee for reliable service will be worth it – especially if the hotel or business offers sub par Internet service, none at all, or a connection for an exorbitant price.

5. Good Tech Support Is a Must — Don’t put all your faith into the local guru who set up your network. There are many good technical people out there and there are many more that will make a mess of your business. This can create some really tough decisions. I like to use this analogy:

I’m not a concert pianist – not even close – so I can’t tell the guy that hacks away playing Beatles tunes in the piano bar at my local pub from a Julliard trained pianist. Since I can’t play a lick, they all amaze me. Well, the same holds true for non-technical business owners hiring network techs or developers. They all seem amazingly smart when in fact they may run you into the ground. The only way to tell is to find somebody with a really good track record of making things work for people. So, ask around.

The good ones have no vested interest in making a custom dynasty of your business (another thing to watch out for). It’s like the doctor who needs the patient to stay sick. You don’t want that. Poor or misguided tech support may be the single largest cause for failed ISPs or issues with selling your business.

6. Make Payment As Easy As Possible — When a customer is delinquent on paying their bill, make sure you have a way to direct them to a payment site. Don’t just shut off their service and wait for them to call. For small operators, you don’t need to automate the payment cycle, just send them to a static page telling them how to pay their bill. For larger operators (3,000-plus users), the expense of automated bill payment may be worth the extra cost, but with a smaller set of customers, a static redirection to a page with instructions and a phone number will suffice.

7. Look for a Competitive Credit Card Processor — Your bank will likely provide a service for you, but they are generally a middle man in this transaction. There are credit card processing agencies that sell their services direct and may be more cost effective. These are no-brainer dollars that add up each month in savings.

8. Don’t Overspend – Remember that on the open market your business is likely only to be valued at three quarters of your revenue, so don’t delude yourself and overspend on equipment and borrowing thinking that a white night will come along. If your revenue is $500,000 per year, you will be in good shape if you get $400,000 for your business. And this may just cover your debt. Yes, there are exceptions and you might get a bit more, but don’t expect two-times your revenue. It’s just not going to happen, so plan your expenses accordingly.

9. Cross Market — Don’t be shy about it. Once you have a captive audience, there are all kinds of cross marketing ideas you can do for extra revenue. Done tastefully, your customers won’t mind. This could be a special with the local car dealer running coupons for them. Or for something like a pizza place. There is unlimited potential here, and if you’re not taking advantage of it, you’re missing out on easy revenue.

10. Optimize Your Bandwidth — Technology like a NetEqualizer bandwidth controller will allow you to increase your customer base by between 10 to 30 percent without having to purchase additional resources. This allows you to increase the amount of people you can put into your infrastructure without an expensive build out. Yet, a purchase like this can be a difficult decision. It’s best to think in the long term.  A NetEqualizer is a one-time cost that will pay for itself in about 4 months. On the other hand, purchasing additional bandwidth keeps adding up month after month.

Obviously, these 10 tips won’t apply to every ISP/WISP, but it’s almost a given that at least some of these issues will emerge over time. While there’s no guarantee that any business will succeed, these tips should help steer Internet service providers in the right direction.

The recent announcement that Time Warner Cable Internet plans to experiment with a quota-based bandwidth system has sparked lively debates throughout cyberspace. Although the metering will only be done in a limited market for now, it stands as an indication of the direction ISPs may be heading in the future.

Over the past several years, we have seen firsthand the pros and cons of bandwidth metering. Ultimately, invoking a quota-based system does achieve the desired effect of getting customers to back off on their usage — especially the aggressive Internet users who take up a large amount of the bandwidth on a network.. However, this outcome doesn’t always develop smoothly as downsides exist for both the ISP and the consumer.

From the Internet provider perspective, a quota-based system can put an ISP at a competitive disadvantage when marketing against the competition. Consumers will obviously choose unlimited bandwidth if given a choice at the same price. As the Time Warner article states, most providers already monitor your bandwidth utilization and will secretly kick you offline when some magic level of bandwidth usage has been reached. To date, it has not been a good idea to flaunt this policy and many ISPs do their best to keep it under the radar.

In addition, enforcing and demonstrating a quota-based system to customers will add overhead costs and also create more customer calls and complaints. It will require more sophistication in billing and the ability for customers to view their accounts in real time. Some consumers will demand this, and rightly so.

Therefore, a quota-based system is not simply a quick fix in response to increased bandwidth usage. Considering these negative repercussions, you may wonder what motivates ISPs to put such a system in place. As you may have guessed, it ultimately comes down to the bottom line.

ISPs are often getting charged or incurring cost overruns on total amount of bytes transferred. They are many times resellers of bandwidth themselves and may be getting charged by the byte and, by metering and a quota-based system, are just passing this cost along to the customers. In this case, on face value, quotas allow a provider to adopt a model where they don’t have to worry about cost overruns based on their total usage. They essentially hand this problem to their subscribers

A second common motivation is that ISPs are simply trying to keep their own peak utilization down and avoid purchasing extra bandwidth to meet the sporadic increases in demand. This is much like power companies that don’t want to incur the expense of new power plants to just meet the demands during peak usage times.

Quotas in this case do have the desired effect of lowering peak usage, but there are other ways to solve the problem without passing the burden of byte counting on to the consumer. For example, behavior-based and fairness reallocation has proven to solve this issue without the downsides of quotas.

A final motivation for the provider is that a quota system will take some of the heat off of their backs from the FCC. According to other articles we have seen, ISPs have discreetly, if not secretly, been toying with bandwidth, redirecting it based on type and such. So, now, just coming clean and charging for what consumers use may be a step in the right direction – at least where policy disclosure is concerned.

For the consumer, this increased candor from ISPs is the only real advantage of a quota-based system. Rather than being misled and having providers play all sorts of bandwidth tricks, quotas at least put customers in the know. Although, the complexity and hassle of monitoring one’s own bandwidth usage on a monthly basis, similar to cell phone minutes, is something most consumers most likely don’t want to deal with.

Personally, I’m on the fence in regard to this issue. Just like believing in Santa Claus, I liked the illusion of unlimited bandwidth, but now, as quota-based systems emerge, I may be faced with reality. It will be interesting to see how the Time Warner experiment pans out.

Editor’s final note: To date, the take rate on our quota-based system is minimal at best. Five percent of the providers we support (out of several thousand) use a quota-based system.

Of the 1,000 PC users surveyed in March 2008 through market research company Ipsos, 57 percent felt that they will most likely be the victims of cyber crime with only 21 percent believing they will be victims of burglary.

These results can be linked to two key behavioral trends:

• Very high use of the Internet for increasingly sensitive transactions:
  • 74 percent of users shop online
  • 67 percent of users bank online
  • 63 percent of users pay bills online

• Low levels of protection with high concerns for cyber-related crime:
  • 15 percent of users surveyed didn’t know when security software was installed on their computers
  • 91percent of users agreed that cyber theft is certainly a concern

While 57 percent of users surveyed said they would most likely be the victims of cyber crime/theft, 73 percent felt confident that they were being protected by their Internet security provider.

• Do use search words and search engine advertising. These clicks are worth it if you want to spend your click-money wisely.
• Don’t use content ads, or, if you do, use them with extreme caution. We have deduced through much anecdotal evidence that our content ads were often fraudulently abused through scams that Google was unable to detect. In the last six months or so they seem to have this under control, but in general content ad clicks are not worth it. Too many bored people clicking them with no intention to buy anything.
• Do use the time of day feature. If you have a commercial product for business, don’t run it on weekends. You will get less qualified and more confused buyers. Obviously, if you are targeting home consumers, weekends may be your best bet.
• Don’t try to be first or even second on the page. Set your budget and try to get the cheapest clicks possible. For example if you are selling “spy vision glasses” and you budget $80 per day, you want to barely reach your target each day. For two reasons.
  • 1) Potential customers that find you on the second page are very seriously searching for a product and are likely to buy. If you can hit your target budget with clicks on the second (less expensive) page your value per click will be much higher.
  • 2) Being the first product displayed will cost you much more per click and will most most likely bring you an early browser rather than somebody ready to buy.
• Do make sure you have some motivation on your home page to entice people to tell you who they are. This could be a prize giveaway or a white paper — basically just something of value for which they will register or provide contact information.
• Don’t hide your price. If your product costs $200 and customers are expecting something for $50, you are not going to upsell them. These clicks to unqualified customers will cost you both time and money.
• Do run multiple ads and route them to specific pages. We call this follow through. Your google ad has very limited word space so, when clicking, the customer should see a follow through on the ad they just clicked. For example, if your product ad says “bumper stickers for baseball fans” don’t send them to your home page if it features 100 other different products. Send them to something specific regarding baseball bumper stickers.

Obviously these tips aren’t foolproof, but we hope they will make the Google Adwords process both easier and more productive.

In March, Google Sites once again ranked as the top U.S. video property with more than 4.3 billion videos viewed (38 percent share of all videos), gaining 2.6 share points versus the previous month. YouTube.com accounted for 98 percent of all videos viewed at Google Sites. Fox Interactive Media ranked second with 477 million videos (4.2 percent), followed by Yahoo! Sites with 328 million (2.9 percent) and Viacom Digital with 249 million (2.2 percent).

Nearly 139 million U.S. Internet users watched an average of 83 videos per viewer in March. Google Sites also attracted the most viewers (85.7 million), where they watched an average of 51 videos per person. Fox Interactive attracted the second most viewers (54.3 million), followed by Yahoo! Sites (37.5 million) and Viacom Digital (26.6 million).

Other notable findings from March 2008 include:

• 73.7 percent of the total U.S. Internet audience viewed online video.
• 84.8 million viewers watched 4.3 billion videos on YouTube.com (50.4 videos per viewer).
• 47.7 million viewers watched 400 million videos on MySpace.com (8.4 videos per viewer).
• The average online video duration was 2.8 minutes.
• The average online video viewer watched 235 minutes of video.

From many of our NetEqualizer users, we often hear, “I want to offer my customers a fixed-rate one-megabit link, but at night, or when the bandwidth is there, I want to let them have more”. In most cases, the reasons for doing this type of feature are noble and honest. The operator requesting it is simply trying to allow his or her customers access to a resource that has already been paid for. Call it a gesture of good faith. But, in the end, it can lead to further complications.

The problem with this offering is that it can be like slipping up while training your dog. You have to be consistent if you don’t want problems. For example, you can’t let the dog lick scraps off the table on Sunday and then tell him he can’t do it on Monday. Well, the same is true for your customers (We’re not insinuating they are dogs, of course). If you provide them with higher speeds when your network isn’t busy, they may be calling you when your contention ratios are at their peak during times of greater usage. To avoid this, it is best to not to let them ever go above their contracted amount – even when the bandwidth is available.

The Supply Side

Now that we’ve covered the possible confusion bursting may cause for your end-customer, we should take a look at how bursting affects an ISP from the perspective of variable rate bandwidth being offered by your upstream provider.

Back in 2001, when the NetEqualizer was just a lone neuron in the far corner of my developing brain, a partner and I were running a fledgling local neighborhood WISP. To get started, we pulled in a half T1 from a local bandwidth provider.

The pricing is where things got complicated. While we had a half T1, if we went over that more than five percent of the time, the provider was going to charge us large random amounts of cash. Sort of like using too many minutes on your cell phone.

According to our provider, this bursting feature was touted as a great benefit to us as the extra bandwidth would be there when we needed it. On the other hand, there was also this inner-fear of dipping into the extra bandwidth as we knew things could quickly get out of our control. For example, what if some psycho customer drove my usage over the half T1 for a month and bankrupted me before we even detected it? This was just one of the nightmare scenarios that went through my head.

Just to give you a better idea of what the experience was like, think of it this way. Have you ever made an international call from a hotel because it was your only choice and then gotten nailed with a $20 fee for a two minute conversation? This experience was kind of like that. You don’t really know what to expect, but you’re pretty sure it’s not going to be good.

I’m a business owner whose gut instinct is to live within my means. This includes determining how much bandwidth my business needs by sizing it correctly and avoiding hidden costs.

Yet, for many business owners this process is made more complicated by the policies of their bandwidth providers, bursting being a major factor. Well, it’s time to fight back. If you have a provider that offers you bursting, ask them the following questions:

• Can I have in writing how this bursting feature works exactly?
• Is a burst one second, 10 seconds, or 10 hours at a time?
• Is it available all of the time, or just when my upstream provider(s) circuits are not busy?
• If it is available for 10 hours, can I just negotiate a flat rate for this extra bandwidth?
• Can you just turn it off for me?

For many customers that we’ve spoken with, bursting is creating more of a fear of overcharge than any tangible benefits. On the other hand, the bursting feature is often helping their upstream provider.

For an upstream provider who is subdividing a large Internet pipe into smaller pipes for resale, it is difficult to enforce a fixed bandwidth limit. So, rather than purchase expensive equipment to divvy up their bandwidth evenly amongst their customers, providers may instead offer bursting as a “feature”. And, while they are at it, they’ll charge you for something that you likely don’t really need.

So, think twice about who’s really benefiting from bursting and know that a few questions can go along way in evening out the deal with your provider. Chances are bursting may be doing your company more harm than good.

In short, while bursting may seem harmless on the surface for both the ISP and the customer, over time the potential problems can significantly outweigh the benefits. Put simply, the best way to avoid this is to maintain consistency at all times and leave bursting for the birds.

“The continued demand by remote workers for high-performance collaborative and centralized business applications is the driving force behind these increases,” says Robin Gareiss, Nemertes’ executive vice president and senior founding partner.

Nemertes also found the adoption of managed services at the branch is increasing, and has been for the past three years. Now, 63% of companies use some type of managed service at the branch, compared with 46% in 2007, and 27% in 2006. Participants tend to use traditional carriers for network-based services, such as router management, WAN management and implementations. With resellers, the focus is ongoing management of applications, installation and training. With systems integrators, the focus is on design and implementation. With outsourcers, they center on network or application management.

Other key findings of the research include:

• Video applications (including desktop, room-based and telepresence) top the list of reasons for bandwidth growth.
• New collaborative applications, multimedia Web-based applications, and IP telephony are also drivers for bandwidth increase.
• Management and monitoring tools are crucial for benchmarking costs, performance and utilization.
• Robust, reliable, high-performance networks are crucial, especially in light of new applications and bandwidth requirements.
• Optimization tools can assist with curtailing bandwidth spending and improve network monitoring.
• Forty-nine percent of benchmark participants use managed routers or other network gear at the branch, followed by 22% using IP telephony management.

Analysis: Vuze’s Allegations Are Anecdotal, But Troubling

By Art Reisman

Marvin Ammori of Free Press recently referenced a report issued by a third party company, Vuze, that insinuates with some evidence that ISPs are blocking certain kinds of Internet content.

While I respect Marvin’s right to his opinion, and support the mission of FreePress.net, I was asked to comment on his assertions by the editors of PC Magazine and ExtremeTech.

As to the report issued by Vuze: I read their findings over and they were very careful to point out that their evidence is anecdotal in nature. Other than Comcast, which was outed and forced to admit its practice of blocking peer-to-peer traffic under certain conditions, the report does nothing to convince me conclusively of any deliberate blocking. In today’s world, anybody can assert something from scant evidence and there will be a bandwagon of followers drawing their own conclusions for a variety of reasons. Marvin’s reasons for jumping the bandwagon are noble but I think we must be careful here.

Now let’s get to Marvin’s comments.

“Vuze’s report suggests what many have feared all along: In addition to Comcast, other phone and cable companies may be censoring legal Web traffic over their networks. Many industry practices remain unknown and are increasingly difficult to detect.”

I can not agree more that industry practices are unknown and difficult to detect; that is an understatement and something I alluded to I wrote last year: “Consumers and innovators cannot be expected to police for abuse, nor should they have to accept interference until their network provider is exposed. Until the FCC makes it clear that it will not tolerate Internet blocking, phone and cable companies will continue to engage in this harmful practice.”

However looking to the government to solve this issue with mandates can easily backfire into a quagmire.

The Internet is what it is today exactly because no regulatory body hovers over it at every turn, although it has become vital and one could argue that somebody must protect it. However, the right way to protect it is to use antitrust laws to make sure consumers have a choice. You might also force some truth in advertising laws to insure consumers have accurate information when choosing a provider. Consumers are smart and savvy and will go with the provider that gives them the best service.

However, I would draw the line and not dictate to providers and tell them how to handle traffic congestion. There are legitimate overload situations on a network that can cause gridlock, and an honest effort to avoid these situations is what most ISPs strive for. Yes, some may view this as greedy abhorrent behavior, but you can’t have it both ways. If you want a government-run Internet, then come out and lobby for it — but declare your motives! But for now, these are public companies and over-regulating them will backfire. The way to solve it is with consumer choice and not another office at the FCC.

For example: We have three choices for broadband Internet in my part of Colorado: Comcast, Qwest and Mesa Networks. Mesa is the local wireless ISP here in the Front range. I know for a fact that Mesa Networks does not block or re-direct BitTorrent traffic. The competition is too fierce and being the smaller player, it is in their interest to provide top notch service. Unfortunately, some areas of the country may only have one option and I would concede in this case the FCC needs a soft hand:

1) Do not allow an incumbent to own both wired and licensed frequencies in the same area (if they are the only player). I am aware of several investors that plan to offer high speed internet services over licensed frequencies.

2) Require truth in advertising about contention ratios on a network; contention ratios dictate how many users share an Internet resource.

3) Require ISPs to divulge what bandwidth control techniques they deploy. Note this stops short of telling them what to do.

As for my personal bias, my position as CTO of NetEqualizer, a company that makes bandwidth controllers, seems to insinuate that I am in the pocket of the ISPs. Yes, that is a bias, but for the bulk of this discussion I view the large service providers as a consumer. Big agnostic corporations driven by their stockholders’ greed drive me crazy. Most are not my customers, however I just happen to understand both sides of this equation, as I live and breath bandwidth control for many verticals, and not just public ISPs.

Dr. Lawrence G. Roberts, CEO, Anagran Inc.

He discusses the idea of solving Internet Congestion by Fixing the TCP protocol. Here is an excerpt

There has been widespread discussion lately about the unfairness of the primary protocol we rely on with the Internet – Transmission Control Protocol (TCP) – along with many proposals on how to fix it. Since there are clearly many problems with both slow and unfair service, my question is: Should TCP be overhauled to fix today’s congestion control problem, or does the network itself need fixing?

First, the problems include:

• Multi-flow unfairness – More flows, such as P2P, can consume too much capacity
• Distance unfairness – Long-distance users get slower service
• Loss unfairness – Random packet loss slows flows unevenly; Web access is slowed

He then goes on discuss various specific congestion problems and proposes some ways to solve it by mucking with the TCP protocol itself. It is a very good article!

I Just wanted to point out that inside the NetEqalizer we have already brought back fairness to many congested networks without retrofitting TCP. I just wish we were a little better at getting the word out!

Here is the link to the full article

http://www.internetevolution.com/author.asp?section_id=499&doc_id=150113&

Eli Riles

It is important to understand that the original Napster had a centralized infrastructure. All file transfers happened via the coordination of a central server. Had the music industry embraced this model, they would likely have had a smooth transition from their brick and mortar channel to a soft distribution. Had they only been a bit more farsighted as to the consequences of their actions.

Instead of embracing Napster, the music industry, along with the RIAA (the industry henchman for copyright enforcement), worked to shut Napster down, much the same way they had successfully gone after commercial establishments that play unlicensed music.

There were some smaller label artists that did embrace Napster, obviously looking for untapped market share, but for the most part the industry reacted like a obsolete dinosaur fighting progress out of fear of losing revenue.

I was personally experimenting with downloading music at this time. If Bill Clinton and Obama can admit to illegal drug use, I should be able to confess to one or two illegal downloads without retribution (note: I have since licensed all my music in my library). It wasn’t the free music that attracted me to Napster in 2000, but rather the convenience of getting the tracks I wanted when I wanted them.

Well, the RIAA succeeded in getting an injunction against Napster and shutting them down in February 2001.

This would turn out to be a costly mistake.

It was no coincidence that shortly after the fall of Napster a whole heard of new file sharing techniques showed up. BearShare, Kazaa, Gnutella, Limewire, and Bittorrent all became popular seemingly overnight and once again copyrighted material was being spread all over the world. Only this time it was not coming from a centralized server, but from millions of servers. Now, instead of having one source where music distribution could be tracked, the music industry had a wasp nest of swarming downloads.

Although today there are many paying customers of legal downloads, black market peer-to-peer file sharing still runs rampant, and this time it is not possible to squash the distribution model . BIttorents are themselves not the cause of illegal file sharing, no more than automobiles cause drunk driving. The industry cannot possibly shut down a freely distributed file sharing model without shutting down the Internet itself, and obviously the distribution channel is not guilty of piracy but the people that us it are. Instead, the RIAA has adopted a policy of making examples by tracking down and arresting individual copy right distributors, a daunting and possibly futile task.

For example, it is extremely difficult to get a subpoena to far off corners of the world where governments are concerned with more important matters.

I’ll comment on how the RIAA enforces illegal distribution and the downside of their model in my next posting.

Eli Riles — For the NetEqualizer Blog