ISP Sample Financials

• Securing funding for the project
• Acquiring the equipment needed
• Contracting for a backbone (Internet) connection
• Contracting for telephone services (unless using wireless only)
• Installing, configuring, and testing all equipment
• Marketing and managing your ISP

Based on the success of other ISPs, in a city with 250,000 people an ISP with a fairly agressive advertising campaign should have 6,250 subscribers within 6 to 12 months. At this level, a 9-to-1 ratio (nine subscribers for every phone line) should provide a premium service with no busy signals. With this ratio, 696 phone lines will be needed (6250 subscribers divided by 9, rounded to the nearest 24 lines). At a subscription rate of $20 per month the revenue figures look like this:

Revenue
- from 6250 subscriptions	$125,000
- from 500 domains hosted	$10,000	$135,000
Telephone expense	($17,400)
(696 digital lines at $25 per line)
Backbone expense	($4,000)
Building rent or mortgage	($5,000)
Salaries	($30,000)
Payroll taxes	($2,295)
Advertising budget, per month	($19,500)
Miscellaneous monthly expenses	($13,500)
Equipment depreciation (based on ~$600k of equipment)	($16,666)	($108,361)
		$26,639
Gross margin per month		$319,668 annually
		19.7% gross margin

The above values are consistent with our knowledge and experience, but every city and situation will be different.

A similar table can be found on the web site of another networking equipment manufacturer (Cisco). Their figures for an ISP in 1999 with 100,000 56k subscribers at $22 per month (plus a $25 installation fee) and 1000 high-speed (e.g., wireless) subscribers at $3000 per month (plus $2000 installation fee) look like this:

Revenue, first year	$66,900,000
Total expenses, first year	($53,759,889)
	$13,140,111
Gross margin dollars at end of first year	$1,095,009 monthly
	19.6% gross margin

These figures show about the same overall profitability.

Excerpt courtesy of ISP Ltd.