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 dru
join:2000-09-14
Corona, CA | reply to justin
Re: I tracked down Moon Global First, DeaconBlues' comments about a profitable future, and the new model where ISPs are built or grow on acquisitions of failed ISPs, is basically a good and sound concept. You will see a whole new breed of companies doing ISP consolidation, and moving forward serving existing customers without the debt and red ink run up by failed marketing and bad business plans.
But I also read in the post some of the bad planning that gets ISPs into trouble. The devil is in the details, and in the end, the Flashcom Verizon customers did not pencil out for most potential buyers and investors sponsoring a buyout through the court, because the numbers would not justify the real costs to set them up. While they claim 2000, we counted 1648 as of December 1st, and about 200-300 in attrition each month. In the hearing, the counsel for Flashcom estimated 1000 circuits could be migrated by April 13th, and I heard from Verizon today the number of live circuits is now under 1000. I think that it is optimistic to expect all will re-sign, and at best you can expect 500-600 of them to become the new ISPs paying customers. No matter how wonderful Moon Global might be, there will be a percentage that will say "screw you!" and go with their own choice no matter what.
I am going to explain why 500-600 customers do not offer the profit that DeaconBlues suggests is there. I do want to also make sure people reading this that what I lay out here does not apply to Moon Global, which has existing Verizon infrastructure, circuits, and adding these customers are probably profitable in their scenario, we will assume that they met Verizon's and the courts requirements to complete the deal. What I don't see is it working as a stand-alone startup.
One of the obvious issues in this business that I think gets overlooked is reaching critical mass, where you have enough customers to meet your expenses and cross into profitability. Everyone wants a piece of the action, everyone wants to run their own show, and what we have found is, the ISPs that are hanging in there want outrageous sums to sell their operation legitimately. They are profitable, but the employees pull up each day in new cars and the owners pull up in rusted pickup trucks held together by bond-o. This is because nobody has reached their target numbers, and the pricing wars have lopped off too much of the profit in the DSL market. (We still have Verizon undercutting their resellers in this market)
The small isp's challenge is not that they can't be profitable or have terrible business plans, but there are hundreds of them, duplicating efforts, each with a fraction of the number of subscribers on their backhaul circuits that they expected or can handle. There are hundreds of ISPs in this situation. And the ILECS are getting rich on multiple backhaul circuits, all at 20% utilization. You have to wonder why Covad never figured this out and actually walked all these "underperformers" to Zyan and CAIS.
In Verizon land, you charge $50 of which the phone company gets $32.50 and $2 for USF. So a typical ISP might squeeze a $15 per month gross profit. Then you have bandwidth costs which everybody outside of the business tends to overestimate actual traffic levels, but that's a different story. Add the usual support, email, news, and other overhead costs. But everyone forgets the backhaul costs. A DS3 can cost between $1600 and $4200 from ILECS, but add the meet-point mileage and then colo-center cross connect, and you can be at $4000-$5000. (Covad, Rhythms, Northpoint, and New Edge all provide delivered backhauls at about $4000) This monthly recurring cost should be divided by the number of live, paying customers.
While everyone thinks "hey, you can jam 2000 customers on that circuit, piece of cake!" and this puts the per head costs for backhaul at less than $2 per head. But it is the actual number of live customers affects your bottom line and monthly cash flow! The grim reality is, there are many ISPs with 300 to 500 customers on their Verizon T3's and this means the backhaul cost can run $10-13 per head. At least bandwidth can be scaled on a usage or per meg basis from colo centers, so the real bottom line killer is that backhaul.
It is really easy to see with colo space, bandwidth, equipment leasing, backhauls, cross connects, plus technical support, credit card fees (3%+),IP address management, mail and news services could easily run 10-12K per month. If you net 2000 subscribers it's worth it, but net 600 subscribers and at $49.95 at least, you're upside down almost 3 grand a month by my calculations, and that is if everyone pays and the "one man show" isn't drawing a salary from the operation. Actually, he'd need a good one from elsewhere to kick in the shortfall.
But Flashcom got $60K of your money, and there is still the circuit supercedure debt issues to get through with Verizon. They might float it for awhile but ultimately they can shut you off; they have you by the short and curlies. The only remaining unknown is how many of the remaining Flashcom customers are at premium service levels, ie, those left at Gold or Platinum that would greatly enhance the revenue figures if there are a healthy percentage. But, given the numbers provided by the court, it wasn't promising enough for anyone to bet the farm.
This is why this "deal" only appealed and worked for a few local ISPs who #1, already had ATM circuits, equipment, and ample space left to accommodate them, #2, have a working provisioning process in place to migrate hundreds of customers en masse.
The ultimate model that will work as DeaconBlues suggests is a well-funded company that takes this deal along with dozens each week, rolling up and consolidating ISPs that are in trouble or hopelessly overbuilt. The ROI could be there, but not given the realities of this particular Flashcom deal, starting up from scratch. If something looks too good to be true ($100 a sub)it probably is.
Finally, potential bidders were undoubtedly spooked that Verizon Online keeps extending their $39.95 per month, free camera, and free modem and installation "Big Deal". It was supposed to end in March, but now runs through the end of May. Given that Verizon now charges ISPs $200 for the modem, and $60 for the install, and most independent ISPs can't meet the $40 price for reasons listed above, Verizon sales will continue to be flat. All independent ISPs report sales have dropped to a trickle. It is uncertain what control Moon Global will have to retain customers after they are migrated. There is nothing stopping them from not paying their bill or sticking around for 30 days then switching to Verizon Online.
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Longest sentence in the English language: "I do." | |
Anon | Wow! I am so excited! This thread has brought about some of the best information and discussion I've seen lately! So Very Kewl!
Ok, just a few last bits. As to outsourced locations for customer services...
Critical Path which bought supernews last year is your mail and news provider. In reality you would be simply amazed at how many fortune 500 companies are using CP. And if not CP, then try Comtouch. Either way, this type of mission critical mail outsourcing is the way many many many are going.
As to Technical support. Last I checked Telocity was outsourcing virtually ALL technical support. Tier 1 2 and 3. Once again, a fixed cost per customer is the key.
As far as webhosting is concerned, Flashcom did not offer it and as such, we would not have provided it. There are however, tons of companies that have this as their business model.. Try Netopia.
For a success story where this model has worked, look at MM Internet in Long Beach CA. They have a fantastic rating as far as customer satisfaction, have remained small and service ONLY GTE customers in southern California. Additionally, they do very little advertising. Check it out. This model WILL work. Not for me though...I'm on to something else!
Ok.....discuss amongst yourselves.... | |
| Gee Dork,opps meant deak, can we meet and discuss this new scam of your.
Perhaps we can hook up with deltat2000 when he comes to visit you.
Then we can both show our appreciation for your great c/s skills. | | |
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| reply to Anon
Interesting this one post generated some lengthy replies...
[text was edited by author 2001-04-05 17:21:44] | |
| reply to Anon
Gotta go with the Deakon on this one. If you know your way around the ISP/telco biz you can cut some pretty sharp deals on cross connects, loops and transit fees. Although the monthly pretax $'s in this case wouldn't be much it could be done as he's noted. I might put in my own mail servers rather than go with CP but that's based on not knowing what the per user rate would be. Anything more than a few $'s per EU and you are burning up profit versus the one time for hardware/software for the mail servers. Tech Support - you would have to outsource it and pray the network you've built is reliable, but the folks at Flashcom did build a reliable network so I'm guessing this one would be no different. I had 14 months of service and 1 hour of downtime. | |
 deltat2000Timor Omnis AbestoPremium
join:2000-04-13
127.0.0.1 | reply to NoConnect
Hey NoConnect............great idea....would love to get together with you an dorkonglue...opps...deakonglue..opps.
Whatever his name is....Guide..........guide..........guide.....
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The Future Is Purchased By The Present! | |
Anon | reply to dru
Re: Verizon / Moon Global hey i see that verizon is offering the bronze for 40 a month but one of my friends has it and does not have a static ip address and you have to use their software i think cause they give you that self install kit..
now i wouldn't know if that would apply to me since i have my line in and all but installing software and no static which i have gotten used to would be i thing i don't wanna try just yet
with webuniverse they are giving mostly the same stuff flashcom was offering static and all that stuff
the website gives pretty much all the info
well i don't know i am trying them out for a year
wish me luck i guess..
i was just tired of my dsl down for two days straight [thurs,fri,part sat] so i just decided to switch to get my service back up as soon as possible
i filled in the form to switch friday night and my dsl is up today i mean yesterday now..
and i had to go to a friends house to access the internet since i had no other connection to the net and that was a pain in the...
so what happened did they switch me already or what cause my dsl is running fine?
no more blinking lights on the dsl modem it is all back to normal it seems for right now
weird.. well we'll see..
if it sucks oh well got 12 months to go since they have a contract and oh they had a contract... so i guess no switching till 12 months or pay the fee... | |
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| reply to Anon
Re: I tracked down Moon Global said by deakonblues2k:
Critical Path which bought supernews last year is your mail and news provider. [...]
As to Technical support. Last I checked Telocity was outsourcing virtually ALL technical support. [...] As far as webhosting is concerned, Flashcom did not offer it and as such, we would not have provided it. There are however, tons of companies that have this as their business model.. Try Netopia.
As an end user, I'd love to have all of that extra stuff (email, webhosting, hand-holding) unbundled .. I want my access provider to give me fast, cheap, reliable network access and otherwise leave me alone. I can (and do) get my own services like email or news or hosting or whatever from third party providers who offer services whose characteristics and prices and features are compatible with my needs.
I want to buy network access from a commodity seller and network services from boutique specialty shops who can cater to my individual preferences. | |
| reply to Anon
Re: Verizon / Moon Global I have gte/verizon at home and had flashcom at my office. the static IP was a pain on the network. To use multiple computers I had to run a program called WinProxy. At home we could run multiple computers on Verizon with NO problem, even when we hosted LAN parties for gaming. I was just waiting for my Flashcom contract to run out to make the switch.
Now with the bankruptcy and service to discontinue in a few days, I called Verizon to switch service. They told me that due to FCC regulations they CAN'T DO IT. I must quit the Flashcom then apply for service with a wait of up to 45 days!!
The Webuniverse/Moon Global contract is terrible, with no rate guarantee and threats of lots of fees for early cancellation that would cost more than keeping the service. The static IP even has a disclaimer that they can change it at any time. I feel totally boxed in. The only way to not have a break in service is to agree to this thing and sign up for another year. I hate it!! THeir service/ reliability better not suck or I will be filing a lawsuit claiming I had to sign this thing under duress. | |
telias
join:2001-04-28
Chino Hills, CA | reply to Anon
I just switched from Flashcom to Webuniverse and let me tell others who are considering....DON'T DO IT. They're support for DSL is only from 8am-5pm and you can't even get through during business hours. After several calls, it turns out there are only about 3 people for DSL support.
I currently have 768/128 and with Flashcom it was about ~700/~100, not bad, since the switch...I have 238/60 on a good day. I've called, left email and tried everything but a carrier pigeon and rarely does someone get back, and all they have to say is "We're working on it...". It's been going on for 3 weeks now and I'm about ready to jump ship.
In short, look for someone else. | |
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