Renewed Interest In Dial-up Surprises Old-Timers
Around the world, naive computer enthusiasts want to build new ISPs, much to the surprise of veterans who left the business. Here's what these college graduates will need—and how they may fail.by Max Smetannikov [June 21, 2002]
The first dial-up ISPs were startups ten to fifteen years ago. Now, a new wave of dial-up enthusiasts seems to be knocking on the established service providers' doors.
The world of the Internet has changed dramatically—but some simple truths that governed the last round of ISP buildouts remain.
First, the startups will learn to hate the local phone company (David Robertson, vice president of the Texas ISP Association (TISPA) describes the relationship between a local phone company and its ISP customer as similar to that between a car's windshield and a bug).
They'll need some cheap software. They'll need some servers. They should invest in a router. They are most definitely going to shop a lot for used networking gear.
"It's been almost ten years since I started my ISP and three since it went static on the ISP (dial-up) side," says Avi Freedman, chief technologist at Akamai and one of the very first commercial Internet entrepreneurs (he recently sold his ISP business to FASTNET). "After we finished the conversion to PRIs and to a commercial billing package (Optigold) four years ago, very little changed on the dial infrastructure side."
Much to the surprise of individuals like Freedman, there is a revival of sorts as entrepreneurs hope to launch small dial-up and dedicated access ISPs. These people are all over the world, and are looking for help and clues as to how to start an ISP.
"We, two brothers, freshly out of college, both graduates in Computer Engineering & applications, are very much willing to start a company providing Internet connectivity," writes Sourish Chandra to ISP-Planet from a Hotmail account.
Chandra is not alone. Bret Mingo, president of Annapolis, Md.-based CoreTel, says calls from small operators shopping for wholesale access have picked up considerably this year.
"I am not sure why," says Mingo, who aims to sell to mid-size service providers who compete with the regional phone companies.
Newbies like Chandra often come to entrenched providers like CoreTel with naïve questions about what they need to buy, both services and equipment, to get into the business. The good news is that the basics have hardly changed over the last decade.
Any ISP starts with a back end. There, start with a RADIUS server, which matches user names with passwords and e-mail addresses so that only paying subscribers can use your network. The necessary software is available either commercially or as an open source application (i.e. for free). It's a key piece of infrastructure. If it goes down, users can't log in. Most operators run it on two servers so that if one server fails, the other can take over. RADIUS software is typically optimized to run on Unix or Linux machines.
RADIUS has a role beyond security; this is also the machine that feeds the billing application. Keeping billing simple is important. It's a major reason why most ISPs went to flat rate plans. Flat rate plans (charging per month instead of per minute or per kilobyte) make it much cheaper to track users.
Even with a simple price plan, an ISP needs a good billing system. There's a lot of billing software on the market, and ISP-Planet has descriptions of most of the software in the Billing Software Directory.
While every ISP needs to have good billing software, no ISP can skimp on customer service and tech support. The current industry formula says that an ISP needs at least one tech support person for every 2,000 to 3,000 users (and more for smaller ISPs), and, for every 100 to 300 new users signing up each month, one or two technicians handling problems and complaints.
The second piece of must have ISP software is a DNS server. This is an application that matches Internet IP addresses with site names. Without this software, users will not be able to access Web pages. The most popular software for DNS is BIND, and it's free. But the application has to run on a server as well, and the hardware is not free. While the list of applications an ISP can sell online seems endless, it has become customary to offer e-mail with access. To support that, an ISP needs an e-mail program. Again, there are free software options like SendMail and a good array of commercial e-mail servers like Netscape. To process e-mail, an ISP will need to enable one or more of several e-mail transfer protocols, like Simple Mail Transfer Protocol (SMTP), POP3, or Internet Message Access Protocol (IMAP).
While the ISP is in startup mode, all of this software can live on one server, with a back up for redundancy. Linux is the operating system of choice for many Internet professionals because of its UNIX-like stability and Microsoft-like (don't tell anyone we said this) simplicity. It used to be that UNIX servers, like those made by Sun, were prohibitively expensive for startups. Now Sun's small machines, classified as 1U (one rack unit, the amount of space used on a server rack) go for about $1,000.
Once the back end is ready, the ISP is one step closer to getting the business off the ground. The next key element is a termination device to receive modem calls—or terminate dedicated lines if leased line access is part of the business plan. A brand legendary in the ISP world in that regard is Ascend, which was bought out by Lucent several years ago. Ascend's Max TNT was the most popular multiplexer in the late 1990s, and is still one of the favorites. Besides Ascend, Nortel and Alcatel as well as several lesser known manufacturers now make similar boxes.
This is how the ISP works: a subscriber makes a modem call into a phone number provided by an ISP. The phone call is terminated into a multiplexer, which is connected to the ISP's back end. The user is authenticated by the RADIUS server, and the call is sent on to the Internet. While servers can support certain routing functions, no self-respecting ISP would be in business without a router, typically a 2500 or 7500 series Cisco machine. A good size ISP needs a router that can handle Border Gateway Protocol (BGP), the switching protocol used at the core of today's networks.
Many startups buy most of their equipment used, and nowadays lots of used equipment is available on eBay and other Internet auction and ecommerce sites. Street prices for servers hover between $1,000 and $2,500, and a server must have dual power supply and Ethernet ports for easy and reliable connectivity. While a new Ascend TNT box costs close to $200,000, a used one can be bought for about $10,000.
The router is connected to the Internet with a dedicated line of some sort—T1, frame relay, Ethernet, anything the ISP can buy. The telco and backbone options will be determined by the businesslocation. For more on non-phone company backbone providers, see ISP-Planet's Backbone Directory.
Dealing with the local phone company is a source of hardship and frustration for any ISP owner, especially at the startup stage. More often than not, a telco sees an ISP as just another customer, or even as a competitor, and is oblivious of the fact that service disruptions can destroy a service provider's business. Some ISP owners feel that phone companies even try to destroy their business. Says Freedman, "I still remember the time they needed UPS to deliver our phone bill."
Because the phone company can be difficult to work with, many ISPs choose to buy Internet access from larger ISPs. In the early days of the ISP business, when alternatives did not exist, a service provider would basically ask the telco for lots and lots of phone lines, and manage them through a multiplexer. Dial-up users would literally call the ISP's office location. As ISPs grew and became more geographically dispersed, many ISPs started to have telephone companies aggregate these phone numbers for them at a remote location (a stack of modems with no humans) and just send the calls to the ISP via a PRI (ISDN) line. So end users would call the switches of the telephone company, but get connected to the Internet via ISP's facilities.
In many parts of the globe, there is still no alternative to the above solution, which relies entirely on the phone company.
"People don't realize it, but it's actually harder to provide robust dial service than to provide quality leased line or colocation service," says Freedman.
In the United States, startups can now rent infrastructure—phone lines, RADIUS servers, PRIs—from wholesalers and become a "virtual ISP" (ISPs that build infrastructure are called "facilities based").
Take MegaPop, a StarNet subsidiary, originally a provider of wholesale dial-up exclusively. The company has a network covering the U.S. and Canada, and its latest program allows future ISP owners to set up their entire business through a Web portal.
"The cost for people who want to be ISPs these days is pretty much nothing except for marketing," says Michael Alonzo, StarNet manager of dial-up sales. "Large wholesalers like us enables end users to private label phone numbers and then resell them."
While large ISPs like MSN are among MegaPop customers, the company can go very low on price for smaller players. Its secret is in developing a low cost vehicle for ISP owners to add customers to the MegaPop network without letting end-users know they're on the MegaPop network.
Basically, an entrepreneur logs on to MegaPop's portal and assigns a name and an e-mail account to an end user. Users then log on to MegaPop's network under the name of their local ISP. MegaPop does require a $500 monthly minimum from its ISP customers, which its executives estimate means having 61 dial-up users on board.
"We feel like asking ISPs to have at least 61 users is pretty fair," says Alonzo.
— End
Related articles:
[June 12, 2000]
ISP Profile: bedford.net
[May 12, 2000]
Business Plan Basics
[Aug. 9, 1999]
Newbie's Guide to Starting an ISP
Online resources:
ISP-Planet Backbone Directory
ISP-Planet Billing Service Directory
ISP-Planet Guide to Building an ISP
Lucent PortMaster PRI Manuals
Max TNT Guides
More ISP Resources
