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The competition for Internet Services in this market can be broken into four categories: AOL, National ISPs, Local ISPs, and cable. Because a local ISP has so many advantages for the customer over the National Providers and AOL, it is the existing and future Local ISPs that have to be studied most closely. There is significant competition based on price and service. The key to obtaining significant market share is to offer the best service. A reputation for good connectivity, no busy signals, courteous staff, and breadth of service will allow us to grow steadily at profitable pricing.
On-line Services
The On-line services are actually the source of most new Internet customers. AOL is the training ground for the consumer to become familiar with computer information resources, interactive forums, and the Internet. Because of their pricing policies and inflexibility they force their customers to seek alternatives as soon as they find they are online more than about 30 hours a month. Some drawbacks to AOL include:
- Unprofessional email addresses (TheSmithFamily22@aol.com)
- Busy signals
- Slow modems (33.6 KBPS)
- Unresponsive help desks
- Lack of security
National Service Providers The national service providers include FlashNet, Mindspring, Microsoft Network, and ATT. All three have dial-up Points Of Presence in our target market. These are true Internet Service Providers but have some of the same drawbacks as the On-line services:
- Busy signals
- Slow modems
- Impossible to reach help desk
Local Service Providers These are the true competition for our business. Their business model is the same as ours. For one reason or another each one of them has failed to meet market demand for reliability and service. Here is a list from our competitive analysis. (local ISPs) ISP Number of Modems Number of Customers
- ICYNet 24 500
- Rustynet 60 1,200
- Eaglesnet 200 1,800
- NuNet 60 40
- Totals 180 3,540
ICYNET is based in Slumberville. They provide local calling to the entire County by back-hauling all calls over a T1. This means they are limited to 23 simultaneous calls. Their investment in additional lines will put them at a competitive disadvantage to us.
RustyNet was until recently the biggest concern. Their main Point Of Presence is located here and they have the biggest market share. After the recent acquisition by a National firm they have changed their focus to "business" clients and have abandoned their effort to gain market share. We predict that attracting their disgruntled customers will be an immediate opportunity.
EaglesNet is run by a very competent Jim Polk out of the basement of his father's house. They provide good service but they will not be able to grow due to lack of funding to hire 24 hour support staff, etc.
NuNet is the most recent entry into this market. They are an offshoot of a local cellular phone franchise. It is assumed they have adequate capital to grow and that they see long term benefits to being in this market. They plan on buying market share by being the "low cost" provider. Because they will be after the mass market they will probably have rigid constraints on what services they offer. We will be able to meet this challenge by offering free Web pages, family accounts, info-responders, etc.
Reprinted with permission by - Richard Stiennon May 16, 1996
Threat Chaos Blog
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