As telecom giants began to offer Internet access to the masses during the last couple of years, industry experts were quick to herald the downfall of the local ISP. They couldn't have been more wrong.
Despite the higher costs of new modem technologies and well-financed competition from national long distance carriers, there are 4,500 ISPs in the U.S. today, according to the Gartner Group. These ISPs are now facing a shakeout that could lead to a consolidation of up to 90 percent of all of today's ISP businesses over the next five years, the research firm predicts. And guess who's going to get it? It's not the little guys.
For one thing, the long distance giants provide the little guys with something they didn't have before: a recognized name and large amounts of advertising dollars that brought legitimacy to the Net and sold its benefits to the public.
When advertisements from national providers flooded the airwaves, local ISPs were quick to see benefits. Whether it was MCI's flaxen-haired dancing girl or AT&T's "You Will," commercials, the big guys churned out commercials that viewed like public service spots promoting the benefits of getting online. The major ISPs found the Internet to be an easy sell, but selling themselves as the ticket to get there was not as simple. Consumers sold on the Internet craze turned to friends and coworkers for advice in going online, not to Sprint or AT&T.
"Over the past year, we've seen an incredible surge in signups," said Mike Lester, CEO of Galaxy Star Systems, a local provider based in Tulsa, Oklahoma. "It didn't take long to figure out that, much to our surprise, the major television campaigns of the large online services actually delivered far more customers to our door than anything we could possibly do on our own."
On the Internet, having a name like AT&T isn't necessarily much of a benefit. Users want the Internet, and the brand name that brings it to them is a secondary consideration. While the national providers offer basic access for a standard price, the local providers offer more choices and services, often at lower prices.
And adding a service as simple as personal Web pages is much easier on the local level than it is on a nationwide scale because local providers can be more responsive and sympathetic to new users. An even greater challenge for the giants is trying to set prices competitively for each local market.
Looks like the very force that industry analysts predicted would mark the decline of the small local provider actually has helped it flourish. And the growth in competition at the local level continues to result in a win for the average Net user.