StatsAudienceCost Plays Small Factor in Choice of Backbone Provider

Cost Plays Small Factor in Choice of Backbone Provider

Players in the highly competitive Internet backbone market adapt to suit the needs of their ISP clients, according to a report by the CyberAtlas Research Series, which found that uptimeguarantees, throughput and capacity are the primary factors that determinewhich network operator ISPs select.

The current economic climate in the U.S. requires that players in the highly competitive Internet backbone market adapt to suit the needs of their ISP clients, according to a new report by CyberAtlas Research Series, a division of INT Media Group Inc.

“During stagnant economic conditions, savvy ISP operators know that in order to raise profit margins they must reduce operating expenses,” the report, Navigating Risks and Opportunities in the North American Backbone Market, said. “Cost-cutting tactics include increasing network efficiency and implementing bandwidth conservation programs, which could spell disaster for backbone providers’ bandwidth sales. However, resourceful network operators recognize that this movement represents new revenue opportunities, which might determine whether ISP clients stick with their current backbone provider, or switch to a rival firm.”

The report stems from a survey of visitors to internet.com’s ISP-Planet. CyberAtlas Research Series surveyed more than 1,100 respondents from March 6 to 27, 2001. Of those respondents, 256 questionnaires qualified as North American ISP operators.

“One of the things we found is that cost plays a relatively small factor in determining which network operator an ISP selects for long-term transport,” said Patricia Fusco, author of the report and managing editor of ISP-Planet. “Typically newer networks that are still deploying systems to expand services naturally have higher costs involved. Cash flow is very important and getting data into those pipes as soon as possible is equally important.”

Indeed, 96 percent of the ISPs surveyed said a backbone provider’s uptime guarantees, throughput and capacity are the primary factors that determine which operator they select. Ninety-four percent of the ISPs said a backbone provider’s network quality — specifically latency and packet delivery performance — is the key secondary factor that determines the which operator they select, while 86 percent said customer care — timely order fulfillment and human contact — are as important as cost-effective pricing for services.

The report also found that backbone providers must gear their marketing toward two key segments of decision-makers in ISPs. The top decision makers — CEOs and upper management — tend to look for cost and reliability, Fusco said. Secondary decision makers — network administrators — are looking for network quality and customer care. And network administrators, which tend to have day-to-day contact with backbone providers, are much more likely to be dissatisfied with the service they are receiving.

The report found that 58.2 percent of ISP CEOs or owners are very satisfied with their current backbone provider, while 27 percent are somewhat satisfied and 14.8 percent are dissatisfied. However, among network administrators, 60 percent were very satisfied, 17.4 percent were somewhat satisfied, and 22.6 percent were dissatisfied.

“Our analysis found more than 14 percent of ISPs said they are dissatisfied with their current backbone provider, which translates to over 1,000 North American ISPs that are likely to switch backbone providers this year, and that equates to about $10.3 billion,” Fusco said.

If the nearly 23 percent of network administrators who are dissatisfied were to get their way, backbone operators would find more than 1,700 ISP accounts at risk.

So what can backbone operators do to enhance their standing and maybe pick up some of those accounts? One method is deploying fixed wireless gear for connecting ISP customers to T-1 circuits without backhauling fiber or copper lines.

“Wireless represents some great cost cutting opportunities for backbone providers that choose to connect ISPs,” Fusco said. “Whether it’s wireless upstream connections or a wireless backhaul, when you don’t have to break ground you can really accelerate time-to-market with services, which is great news for ISPs and better news for network operators.”

Other possibilities include expanding wholesale programs to serve 2- and 3-Tier ISP markets with upstream connections to network operators and embracing a wholly distributive model for collocation services to small office-home office (SOHO) and B2B markets via service providers.

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