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 basshiveTrue-Playaz
join:2001-02-26
Waterford, WI
| Re: I tracked down Moon Global I have to side with Justin here. 5k a month is a GROSS under-estimation of costs for co-location and bandwidth. 5k a month is like 50$ a month to the big dogs. Costs for that kind of pipe start along the lines of 2-3k for 2mbit and up. Nowhere the near the full speed a DS3 offers. Co-location is not chump change either. All in all the costs would really be much much higher then 5k.
I think this story is a nice fairy tail but in practice, its just that, a fairy tail. There are so many more aspects to the business then getting customers, bandwidth and location.
One company that seems to be doing things right is Flex.Com in Hawaii. If only more ISPs followed the same practices they do...
ohhhblahdee ohhhbladah...
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..::drum and bass cannot be stopped::..
[text was edited by author 2001-04-05 10:28:33] | |
|  | Anon | Re: I tracked down Moon Global I beg to differ. You would really be surprised at how little traffic 1700 largely residential users pass on a sustained basis. Most of the traffic req could easily be satisfied with a 5-10 meg ethernet handoff. lets say your DS3 and bandwidth costs amounted to 10K a month. You still have a HUGE profit margin. The actually COST of the DSL line is in the human support factor. Remove the support factor or get it on a managable cost basis (such as outsourcing) and you can easily turn a profit. The problem is that BIG isp's employ dozens of customer care people, dozens and dozens of tech support and provisioing people, and a good sized application development group to work on the systems and an accounting department. Not to mention big C-Level salaries which easily reach into the hundreds of thousdands of dollars with kick ass bonus plans. You wanna know why the ISP's are going out of business?
In this scenario, ONE PERSON could actually run this ISP and outsource everything at a relatively FIXED cost thus ensuring that the margins are met and the bills get paid. Give me a copy of ICVerify and and Excel spreadsheet and I could personally bill 1700 customers in a weekend.
The real costs are behind the lines... | |
| | basshiveTrue-Playaz
join:2001-02-26
Waterford, WI | Re: I tracked down Moon Global The *theory* is great. I still think the practice will fail. Even if you have prequal customers, you still need to advertise. How long do you think things can stay as is and still turn a profit? Costs change daily. You can negotiate costs all you want but they will go up. You have to advertise and seek growth. These things cost time and money and for a small while, MAYBE one person can manage it all, but in the long one you need people. And people are just the beginning. Until the model you speak of is done and is shown to be profitable I will continue to see the idea as nothing more than a fairy tale. Its easy to say companies have too many tech support personnel etc but the fact is, with the current state of end users today, companies need those personnel.
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..::drum and bass cannot be stopped::.. | |
| | | yazdzikPremium,MVM
join:2000-07-26
Honesdale, PA
kudos:1 | Re: I tracked down Moon Global Dear Friends,
Fascinating discussion.
The theories behind fixed-cost capitalisation, and growth based forward depreciation bases are being compared in a practical setting, which, if the costs were predicted accurately for the fixed cost model, would allow for a relatively high margin.
Who among you wonders how a "trading firm" survives, when there a often monthly losses, which would appear unsustainable?
Leaving aside covered fixeds, there is always revenue from the co-commissions on trades.
Thus, trader joe loses $20k, while costing himself commissions, whereby the firm supplying his desk may take have of those commissions going to the clearing firm. Thus, if Joe were to have lost his money on trading 400k shares, at around 1.5c per, total commissions before rebates= $60k, thus the firm, garnering 50% of the commissions, before fixeds has a profit before rebates. After rebates, costs, &c, although the individual is in deep shit, the firm is about even on its capital, on a cost basis. Given even marginal risk control, most trading firms do well for the limited partners. Analagous to the EU's fifty dollars per mensam.
Although no one, myself included, would recommend deacon's business model for the fainthearted, there are many theoretical reasons why it would succeed. The cost variable seems to be the fact in dispute here. My own experience is that the costs would probably be higher than deacon's estimates, thus protracting the profitability window. Therein lies the problem. SAP would not view the monthly costs as having been investment, but recurring. Nor can I foresee the ability to depreciate the original cost of buying the prequals, since, if deacon's analysis is correct, the value thereof would remain for accounting purposes, constant. Thus, the purely EBIDTA model which he employs as his basis for asserting profitability.
Should an unindemnified expense occur, the cost is immediately apparent against the current income, and thence, reduces operating capital.
The trading firm system works, because the firms, as does Deacon's model, rely upon outsourcing, such as AT financial. When AT's servers are down, the trader is out of luck. Given the miniscule amount of down time for such a service, losses are infinitesimal. Now, look realistically at DSL. Can anyone name one mail-server, or internet based mail service where one would willing put mission critical communications?
Thus, Deacon's model has one important hole, which lies in the bandwidth philosophy expressed. While true that I, as a home user, use very little bandwidth, I, as do many, rely upon my connexion for my scheduling, etc. The argument may be made that this is foolish, but I would wager that more of us do this than not, to say nothing of how angry I would be if my children could not access their homework, also 'net based. Thus, the "pure" residential user is apocryphal, and multiple redundancy or indemnification becomes necessary.
Then the final CLEC issue, which also affects SAP remains, can one base future profits upon the fixed costs, having reduced initial capital expenditure based upon buying assets at pennies on the dollar? My guess is, with decent luck, probably. But as easily as Deac says. Not likely. The run-out date for profitability would have to be clearly aligned with the cash burn rate.
In short, a very good idea for an entrepeneur seeking reasonable income, who is not betting the rent money for this year, or his bairns' meals. A dirt-cheap chance to drive a Porsche by 2002? Circumscript "maybe." A business with minute personnel costs, low initial capital requirements, and a source of sustainable income, where income and no growth is wanted, may indeed work.
Could one sleep while running it? Not likely.
All good wishes,
yazdzik
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|  deltat2000Timor Omnis AbestoPremium
join:2000-04-13
127.0.0.1 | Great concept Deak,.....but what are you going to do when those companies that you outsourced to start breaking their contracts.......because someone they were outsourcing to went bankrupt..........rotflmao
Guide.....guide.....guide.....where is my tech support......guide....guide......guide
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The Future Is Purchased By The Present! | |
| | deltat2000Timor Omnis AbestoPremium
join:2000-04-13
127.0.0.1 | Lets pray that you never have access to a copy of ICVerify,
and you definately need to get some training in Excel......lmao
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The Future Is Purchased By The Present! | |
| | | | | Re: I tracked down Moon Global While I see a lot of posters, with the exception of deakonblues2k none of you appear to be in Southern California or running an ISP there. Now some of the things in his plan I can't comment on.
1. Cost of DSL loops from GTE: $32 and change for ISP with ~400 customers--bump that number up and you get better profits.
2. Cost of Frame DS-3 $2700 for a 22mbps CIR--note this is just the backhaul for the DSL loops.
3. As to Co-lo costs--I don't know the cost exodus, but rack space in my neck of the woods is about $1500 per month.
4. Internet bandwith costs--Typically are cheaper at colo spaces since they can use a throttled 100mbs lan connection--Broadwing does this at 1 Wilshire. 3 Mbps (dual ds-1) is 1800 from Sprint. 9 Mbs was something like 6500.
5. I would definately not outsource mail or webhosting. One of the thing keeping the smaller ISPs alive is that they can offer a variety of services.
6. Outsourcing level 1 tech support is a good idea. That type of support is easily replaceable.
7. As he says expansion is the real cost. If you could walk into 1700 customers with an acquisition cost of $50 it would be a sweet deal. I would then only advertise as needed, however word of mouth seems to be the best way. (I include this site in word of mouth. As long as you can keep a pool of customers at the 1700 mark you could make the model work. | |
| | | | | Sheeeeeeeeeeiiiiiiitttttttttt. All you looking for a way to make a run at it. Watching the market lately? Intel, Microsoft, SunMicro...all getting hit hard. NASDAQ from 5000 to 1700? Don't you think the trickle-down effect will hit everyone in the Internet biz? When the big guys start losing money, they look to OUR pockets. More bankruptcies to come before the dust settles. Hang on to your bucks and do your due diligence as Justin was suggesting.
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With apologies to Friedrich Nietzche, "Whatever does not kill me is still a pain in the ass!" | |
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| | | You are probably right about billing so many customers in a weekend using ICVerify. The bad thing about ICVerify is I believe it only bills via a modem. I developed a system in only two weeks which could probably bill that same number in only a couple minutes. I'm not sure I can see how you would get the same quality of service without having your own software developers, tech support reps, etc. I would think that your spreadsheet would be prone to data entry errors and your outsourced programmers will be playing Quake every time (just not with a NP line) you turn your back on them. You would have to do auditing to make sure all your other outsourced partners weren't slacking off on your dime. And if you outsource the auditing you are back to square one.
The point I'm getting at is, if you want something done right you have to do it yourself. You have to hire decent people and pay them what there worth or you won't have a quality product. Good people are expensive, which is a major reason these tech companies have such a high burn rate. I don't think DSL is a business where you can just sit back and watch the cash come in. Now a business like insurance....
--Mark | |
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 sporkmedrop the crantini and move it, sisterPremium,MVM
join:2000-07-01
Morristown, NJ
 ·Optimum Online
| said by basshive:
I have to side with Justin here. 5k a month is a GROSS under-estimation of costs for co-location and bandwidth. 5k a month is like 50$ a month to the big dogs. Costs for that kind of pipe start along the lines of 2-3k for 2mbit and up. Nowhere the near the full speed a DS3 offers. Co-location is not chump change either. All in all the costs would really be much much higher then 5k.
Nope. Here's an example based on recent quotes:
Telehouse NY (carrier neutral co-lo)
1 cabinet - $1100/month
AboveNet (also in Telehouse)
$500/Mb (minimum 5) = $5K for 10Mb
If you need more, haggle. Your DSL customers suck bandwidth down, places like Above and Exodus like to give big breaks on people who help even out their traffic. I would wager you could get this down to $300 @ 40-50 Mb... But 2000 customers would not sustain that kind of usage...
Start peering at the NYIIX and drop your paid transit down even more.
The thing I don't see in the original plan is the payment to the telco for each line... That's important. If the retail is $49, the ILEC is charging AT LEAST $30, likely more. That leaves you with $19 or less/subscriber... | |
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