© 2002 Mouhamet DIOP ISP survival guide : A new business model for ISPs AFNOG TOGOG 12-13 May 2002 Page 1 ISP Survival Guide : A new business Model for

© 2002 Mouhamet DIOP ISP survival guide : A new business model for ISPs AFNOG TOGOG 12-13 May 2002 Page 1

ISP Survival Guide : A new business Model for ISPs

ISP Survival Guide : A new business Model for ISPs

Mouhamet DIOPDirecteur Général de NEXT SA

E-mail: [email protected]

Mouhamet DIOPDirecteur Général de NEXT SA

E-mail: [email protected]

AFNOG – May 2002AFNOG – May 2002


AGENDAAGENDA

• The Internet Market

• The regulatory environment

• Telcos Services & Competency

• ISP services & Competency

• New parternship

Source Goeff Houston


The Four Layers of the Internet EconomyThe Four Layers of

the Internet Economy

Internet InfrastructureInternet InfrastructureLayer 1

Application InfrastructureApplication InfrastructureLayer 2

Intermediairy/Market MakerIntermediairy/Market MakerLayer 3

Internet CommerceInternet CommerceLayer 4

Source Cisco


Regulatory: Some fundamental truthsRegulatory: Some fundamental truths

1. Competition is good for the Internet

2. Regulation is usually bad for the Internet

3. Internet development is GOOD for existing telecommunications operators

4. The customer will gain better services, more services and to lower prices !!

See the World Bank’s Economic Toolkit for African Policy Makers

(http://www.worldbank.org/infodev/projects/finafcon.htm)


The African contextThe African context

• Fixed Wire Network for monopoly (DSL included)• Explosion of the Cellular network for new telcos

competitor• Many evolutions in the Wireless market

New media for incoming competitorsWireless Local Loop for the telcosCorporate solutions for VPNsInterconnexion of ISP POPLocal Loop for the ISP customers

• Voice services still the bigger and main service• Voice/Data Integration for Telcos and Corporate• VSAT solutions for Telcos and ISPs• Slow change in the Corporate customers environment• The actors: Telcos, ISP and Integrators.


Problem PointsProblem Points

• The PSTN battleground (revenue sharing model)large scale ISDN demand without associated call revenue

PSTN modem access models are stressing ISDN investment and revenue model

Second PSTN line demand in the surburbs stressing copper plant

Wholesale dial access yet to be accepted

• The Leased Line battleground DC copper pairs, ISDN PVCs, Frame Relay PVCs, High speed

DDS services

dark fibre


Problem PointsProblem Points

• The IP Battlegroundlack of wholesale tariff point

bundled IP vs unbundled IP

settlements (or the lack thereof)

competitive interest in the customer

competitive distraction of limited expertiseTelco’s own ISP absorbs all available clue!

Clue density is a continuing problem

• The Voice BattlegroundVOIP is viable in competition to existing voice pricing

Voice revenue leakage to the ISP sector is emerging


The ProblemThe Problem

• Data over Voice is Exhausted• Access (Modem) market

Slow, Inefficient, Complicated, UnreliableCall Characteristics:

voice vs modem access callCall Concentrations move out to the surburbsCopper loop quality problems

• Data over Voice• Leased Line market

increasing bandwidthdifferent load patterndifferent circuit characteristics required

• Digital Subscriber Line – DSL technology• Wireless Local Loop (licensed and unlicensed solutions)


EvolutionEvolution

• Telco Evolution

• Post

• Telegraph

• Telephone…

• Common Carrier roleone service, one policy, one

operator

Regulatory barriers to competitive entry

indirect taxation base

• ISP, Mobile & Integrated services...

• ISP Evolution• From...Private corporate

networks

• To...LANs, WLANs

• To...Packet Switched Networks

• To...Telco Market and services, IP intelligent services


ISP EvolutionISP Evolution

• Service Internet ProvidersInter-Corporate connectivity

Public Email service network

• Dial Access ProvidersRetail dial access model - email, web services

• Full Service ISPsDial Access, Web Publishing, Email, VPNs …

Carrier services:ISDN primary rate access services

Leased Line services

Private 4 wire services

Radio Spectrum services

IPLs


WHY did ISPs appear?WHY did ISPs appear?

• Classic Market Opportunity :Deregulated communications environment

No license fees

No high capital requirement

No infrastructure build required - overlay

No incumbent monopoly operator

No market resistance (quite the opposite)

NEW customer NEED !!! New services required and new suppliers (ISP)


Customer dilemma :Customer dilemma :

X25

Frame Relay

ATM

InternetAPPLICATIONS(TransactionnelMultimediaWeb Based Applications)

INTERCONNEXION(Remote sites, Broadband , Virtual Private

Network VPN, Security and Mobility)

IntranetExtranet

ISDN LeasedLines

Teleservices

“A customer is not looking for technology but for Solutions”


A Common NeedA Common Need

• IntranetCentralized Resources in term of servers Explosion of internal WEB servers Internal Process Management: ERP, etc…

• Extranet Give access to the internal resources for partners (WEB serevrs, FTP, Support AV, ...) Integration of Suppliers in the process.

• Internet Serveurs WEB

E-Commerce

E-mail, ….


The Telco PerspectiveThe Telco Perspective

• One view is that the Telco serviced the data market to prevent private-wired corporate voice systems gaining market impetus

• It is likely that the Telco did not foresee a competitive data service industry due to:competing data standards

low value data transactions

• Usually, the data market was serviced using the margins of oversupply of voiceVoice provisioning uses long-term investment models

Voice service architecture relies on over-provisioned network

• Additional infrastructure investment to provide DSL services


The Telco PerspectiveThe Telco Perspective

• Voice is good business... But just for themInstalled asset baseStatic service modelHistorical monopoly incumbentHigh revenue potential

• Data is good business for ISP but …WITHOUT Voice• Data business should become part of the Telco

business• Voice Protect Mode

Barriers to voice entry decreasingProtect core voice assets from competitionService the data market at voice bypass prevention pricingRestrict resale access


MPLSTelco-class IP

• MPLS provide:MPLS provide:IP Intelligent VPN’s

Reduction of Backbone complexity

Backbone isolation

Traffic Engineering

Quick Rapide remise en état (50ms)

QoS at level 3 (L3) at each node (DiffServ)

Independence of layer 2 (L2)

MPLS adapt ATM to IP

Evolution to DWDM (IP over Optical)

• Benefit:Benefit:New services and new revenusImprove line usage (Multi-user/ Multi-class statistical muxing)

Improve network reliability

• QUESTION: Who will take care of the QoS in the Internet ?QUESTION: Who will take care of the QoS in the Internet ?


The ISPs view of the TelcoThe ISPs view of the Telco

• SUPPLIER, COMPETITOR, CUSTOMER OR PARTNER ?

• incompetence or malice?• Critical path supplier

Incoming callsISDN primary rate accessesDigital circuitsIPLsUpstream Wholesale IP

• New market: New competitor or customer ???

• CONSULTANCY business to be developped in:

IP network Design

IP services (Adressing, Numbering Plan, Security, etc)

• competitorlarger

more capitalmore staffcustomer relationshipsbilling capabilitylarger network

Cheaper• But also a CUSTOMER for

Service provisionningIP infrastructure management

IP services : Design , market and sales

Network Design


Area of potential Growth for the ISPArea of potential Growth for the ISP

• IP Telephony and Data/Voice IntegrationQuality of serviceBandwidth

shortage still a problem in developing countries

Regulatory prohibitionBut, more than 70% of int’l traffic flows between markets where IP Telephony

already liberalised

Regulatory: liberalising or “turning a blind eye”

Competence – Skills to run a good network for IP Telephony

• Wireless Network (Voice and Data)Easy to installBandwidthUnlicensed technologySecurity is a big concern but solutions exist

• Security Solutions for Network and applications


Addressing constraints: Increased trans-Atlantic bandwidth

Addressing constraints: Increased trans-Atlantic bandwidth

1

10

100

1'000

10'000

TAT-81988

PTAT-11989

TAT-101992

TAT-12/131996

AC-11999

TAT-142000

FlagAtlantic2001

Cir

cuit

co

st p

.a.

(US

$)

1

10

100

1'000

10'000

100'000

Cir

cuit

cap

acit

y (5

6/64

kb

it/s

, 00

0s)

Circuit capacity, rising by 89% p.a .

Circuit costs, falling by 72% p.a .

Source: ITU, adapted from FCC.


6,66,89,07,47,73,57,0

30,0

21,8

0

10

20

30

40

50

60

70

80

90

100

1996 1999 2001

Level 3FrontierQwestGTE (Qwest fiber)IXCWilliamsSprintMCI WorldComAT&T

Network Capacity in U.S. explode over 8,000%Bandwidth IS a KEY ISSUE !!!

Network Capacity in U.S. explode over 8,000%Bandwidth IS a KEY ISSUE !!!

Total Total Bandwidth:Bandwidth:

99.8 terabits/second

21.7 terabits/second

1.2 terabits/second

Fortune Magazine, 3/15/99


IP Telephony wants to be “free”IP Telephony wants to be “free”

0

1

2

3

4

5

6

18-Oct-99

22-Nov-99

10-Dec-99

12-Jan-99

04-Apr-00

Reg

iste

red

use

rs (

mil

lio

n)

0

50

100

150

200

250

300

350

Cal

l m

inu

tes

(mil

lio

n)

Users

minutes

Cumulative number of Dialpad users & call minutesSince launch on 18 Oct. 1999

Source: ITU, adapted from DialPad.com press releases.


Telco Services to ISPsTelco Services to ISPs

• circuit provider

and

• call termination provider

and

• Upstream wholesale ISP

• Single service interface ?

• Servicing the ISP sectorUnderstand the sector’s requirements

Set realistic expectations

Create appropriate service delivery processes


The ISP view of the TelcoThe ISP view of the Telco

• ISP Killer !!!

• dissatisfaction

• suspicion

• forced relationship

• gorilla competitor

• Potential Customer with the biggest customer base


The ideal ISP’s TelcoThe ideal ISP’s Telco

• good, fast, accurate, cheap

• fast service provisioning

• wide portfolio of data services

• low prices

• high quality

• high service accuracy

• non-competitive retail services


The Telco view …ConfusedThe Telco view …Confused

• under-capitalized

• poor service quality

• poor business foundation

• limited role

• limited future

• distracting competitor

• Short term perspective


The Telco viewThe Telco view

• ISPs are a potential revenue streamcall revenue

services revenue

circuit revenue

wholesale IP revenue

• In a competitive carrier world this market cannot be ignored


The TechnologiesThe Technologies

• Service Internet = Independence of the Wireless LOOP

56k Modems56k Modems

ISDNISDN

DSLDSL

CableCable

ModemsModems

NIDNID

Online Access Technologies in EuropeOnline Access Technologies in Europe

Source: Data Monitor, Dec 1998Source: Data Monitor, Dec 1998

Acccess Technologies Global Large BandeAcccess Technologies Global Large Bande

Source: DataMonitor, Dec 1998Source: DataMonitor, Dec 1998


The ISP Survival planThe ISP Survival plan

1. Market Entry

2. Rapid Growth

3. Market Strategic – Partnership or competition

4. Market Exit or Integration


ISP Survival Plan - 1. Market EntryISP Survival Plan - 1. Market Entry

• market analysis

• business plan

• technology plan

• capital

• equipment

• marketing plan

• carrier services

• deployment

• service delivery processes

• staff

• boundless optimism


ISP Survival Plan - 2. GrowthISP Survival Plan - 2. Growth

• rapid application of:capital

equipment

carrier services

staff

service processes

• to meet demand


ISP Survival Plan - 3. Market StrategyISP Survival Plan - 3. Market Strategy

• Telco partnership ExpertiseFacilities ManagementIP network services managementSLA for the IP infrastructure

• Versus Telco competitionDSL market introductionWireless Network WLLVoice Over IP businessBuilding network infrastructureBuilding Application InfrastructuresDevelop the portal as the main and only access to the

customer


ISP Survival Plan - 4. Market ExitISP Survival Plan - 4. Market Exit

• Sale of business assets:expertise

customer contracts

growth potential

or

• Become a new Next Generation Telco

or

• Public Float:an investor market primed on e*hysteria


Generic ISP profile - SmallGeneric ISP profile - Small

Linux or NT Host

Port Concentrator

Modem Bank

Upstream ISP

PSTN


Generic ISP Profile - MediumGeneric ISP Profile - Medium

Upstream ISP

Mail Host

Modem Bank

Web ProxyModem Bank

Web Proxy

Web Proxy


Generic ISP Profile - LargeGeneric ISP Profile - Large

LocalOffice

LocalOffice

LocalOffice

Central Office

Upstream ISP

Access Clients

Access Clients

Access Clients

Access Clients


Generic ISP Profile - LargeGeneric ISP Profile - Large

Upstream ISP

Upstream Feed RouterLocal OfficeAccess Router

Network AccessServer

AccessFilters

RadiusServer

MailServer

DNSServer

WWWCache

WWWServer

UsenetServer

AccountingData

NetworkManagement

Server

Local OfficeLocal OfficeLocal Office


Questions ?Questions ?

Documents

© 2002 Mouhamet DIOP ISP survival guide : A new business model for ISPs AFNOG TOGOG 12-13 May 2002 Page 1 ISP Survival Guide : A new business Model for