David vs. Goliath, Part II

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(For small and mid-size businesses, choosing the right ISP has become more complicated amid all the hype, and now, hysteria over market consolidation. Today, in Part II, a look at the criteria companies should consider when selecting an ISP.)

Rather than basing decisions purely on price, companies should factor a number of other criteria into the mix. One of the most important measures in evaluating new ISP choices is what the average installation time will be. Typically, the stalwarts will win here every time. That’s because the RBOCs have reasonable control over local access, what’s commonly referred to as the “last mile.” Since they often own that local loop of service–unlike the DSLs and other smaller providers who essentially resell third-party services in this area–they can provide better guarantees on installation time as well as offer realistic assessments of mean-time-to-repair, a measurement used to gauge how long it takes for service outages to be restored. The average wait, for example, on DSL providers to install services is a whopping two to three months, whereas most of the large telco and RBOC players can get businesses up and running in a maximum of 30 days, according to Current Analysis’ Carlson.

Another thing to consider is how diversified the ISP is. If a potential partner is completely invested in one kind of technology–like DSL–or one type of service, they are more likely at risk. “It’s smart to look at ISPs not just doing Internet access, but which have a more diversified portfolio,” Carlson adds. In that vein, companies should stick with contenders that perform the basics well–things like Web access, hosting services, high-speed dedicated lines and virtual private networks (VPNs), says IDC’s Harris. It’s there that companies can generate enough margins to stay profitable, he explains. Some of the more glitzy value-added features like calendaring and messaging to cell phones are often a drain on ISPs because similar capabilities are being given away as free services from companies like Yahoo. Harris also cautions businesses to do their homework and research a company’s financial documents. “Don’t take whomever comes through the door with the lowest price,” he says. “You have to think about what you’re being charged and consider if the carrier can make money with those prices.”

Stability is Key

The renowned Woods Hole Oceanographic Institution (WHOI), which conducts marine life and environmental research, learned this lesson. Although its research roots required it to be up and running on the Internet since the 1980s, the institute went looking for a secondary ISP three years ago mainly for redundancy purposes and as a lower cost option, according to Arthur Gaylord, director of computer information services for WHOI, in Woods Hole, Mass. Since providers had not invested much in building on-ramps to the Internet to service the Cape Cod region, WHOI was feeling taxed by pricey local access charges. Although WHOI evaluated some half-dozen other ISPs, Vitts Networks got the contract mainly because of its willingness to invest in the networking technology to establish points of presence on the Cape, a move that would greatly cut costs out of WHOI’s local access charges. WHOI still retained incumbent Genuity Inc. of Burlington, Mass., as a secondary provider, but two-thirds of its bandwidth needs were being fulfilled by Vitts, which warned investors and customers last January that it was closing its doors–only to rebound weeks later with a plan that would keep it in business at least through late February/early March.

“Being a startup, I knew there was some risk,” Gaylord says. “Part of the reason for going with them was to try to encourage growth of Internet services on the Cape. That still was a reasonable thing to do.”

Lessons Learned

–Take a serious look at an ISP’s past financial performance. If they’re too heavily invested in one of the newer technologies like Digital Subscriber Line (DSL) services and not diversified, they’re more likely to be at risk.

–Consider enlisting a backup provider for some of your services as an insurance policy against total downtime in case your main provider goes belly up.

–Thoroughly check business references. Inquire about past performance on things like guaranteed installation time and mean time to repair in the event of a system failure.

–If completely risk adverse, consider going with the larger RBOC or telecommunications players, which may not be as price competitive or service oriented, but are offer stability.

While WHOI considered Vitts’ stability as part of its evaluation criteria, Gaylord admits it wasn’t the primary focus. Although Vitts is still operating, Gaylord spent three weeks gathering quotes and background information on new providers since he says it takes a good three months to get a new carrier in place. In the interim, Gaylord is examining WHOI’s needs to proactively prepare for a possible shortfall in bandwidth for the next few months.

The institute, which primarily uses the Internet for research and as a means to share information (often huge files of numeric research on things like ocean temperatures and currents, computer-generated models or digital photos of geographical formations) with its other facilities and scientists, is deciding whether to move some of the public parts of its Web site to a hosting service, Gaylord says. In addition, they’ve trimmed back newsgroup feeds and are putting restrictions in place for using the Web to do non-work related surfing.

Donna Bolte, controller with Modern Manufacturing Inc. of Worcester, Mass., has no real concerns about the long-term viability of their Internet access provider, Choice One Communications of Rochester, N.Y., which delivers both DSL and phone services to the commercial glass company. References were the key differentiators that won Choice One the manufacturer’s business. “We didn’t consider them a stranger because we knew people using them before they even gave us a list of references to call,” says Bolte. Modern Manufacturing is using the high-speed Internet access to communicate and share information more effectively with its large commercial customers.

SE Group’s Ruggles, on the other hand, says his experiences with failing ISPs makes him far more leery about taking another risk with a startup player. The ski industry consultant, which has offices in Utah, Washington, Vermont, New Hampshire, Colorado and California, is too reliant on its Internet connection for project workgroup collaboration among its disparate offices to chance any interruption in service, he says. As distasteful as Ruggles finds it, his recommendation this time around is to go with a tried and true player, even if they’re more expensive and their service is not as responsive. Says Ruggles: “We’re all at the mercy at the large players now. As an IT manager, I don’t want to put my job on the line.”

Beth Stackpole is a freelance writer living in Newbury, MA. She can be reached at bstack@stackpolepartners.com