Mini How-To

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How to become an ISP

Introduction

The purpose of this mini How-To is to give you guidance for starting your own ISP business. Starting an Internet Service Provider (ISP) business in one sense is rather simple: Connect a bunch of computers together in a network, put all the required software on them to give people Internet services, get yourself a billing programme, connect your network between the Internet and your subscribers, and then market your new ISP business and start making money.

Not too long ago, in the 1990s, the majority of ISPs were hobbyists and techno-geeks (yours truly included). Of course there was less money to be made then, and it was not until the business community started getting involved and demanding that the Internet become more "user friendly" that things really took off.

As everyone knows, today's Internet service business scene is no longer dominated by the home-town ISPs that were common a decade ago. Most of them were bought, went bust, or else have grown beyond recognition. All the same, rural Canada and USA are still un-tapped business markets for the entrepreneur, as well as developing markets elsewhere in the world.

NB: This mini-HowTo is in the process of being extensively edited, re-written, and expanded. Some of the information here is from as far back as 1999, when I began this how-to, so please pardon some of the out-of-date statistics and examples. I am putting a little time in when I can to update it, but please notice the modification date at the bottom of each page to get an idea of how old the information is, and then adjust your attitude accordingly.

From the Don't Just Take My Word For It Department: I am a self-employed and largely self-taught software and network engineer. Don't read any more into my advice than that, please. I've been in the business since the 1970s, but am not a classically-trained business expert. My knowledge and advice comes from personal experience, so you may find (as I often do) that it is at odds with the advice of scholars. What worked and works for me may not work for you.

I share my insight and ideas here in the hopes it will help other entrepreneurs on a shoe-string budget, as I was, in their endeavours to start a small-scale part-time ISP business that hopefully will grow into a full-time ISP business someday. If you are investing a lot of money and need certain results from the outset, that is the purpose of the business-side of this web site. The purpose of this how-to is to guide hobbyists who want start a spare-time ISP in their neighbourhood.

I have tried to cover all of the basic steps, however, this information is not a complete step-by-step guide to starting an ISP. There are many things I do in setting up an ISP network that are not shared here. Even so, I hope it has enough pointers and ideas to get you further down the road to becoming an ISP, and I wish you the best on your journey. :-)

Stopped editing here 31/03/2006 — look for more soon

In starting an ISP, the basic tasks you will want to consider are:

1. Securing funding for the project
2. Acquiring the equipment needed
3. Contracting for a backbone (Internet) connection
4. Contracting for telephone services (unless using wireless only)
5. Installing, configuring, and testing all equipment
6. Marketing and managing your ISP

Securing Funding

Both Canada and the USA have initiatives to bring broadband Internet to rural communities (Canadians click here, Americans click here).

In order to secure funding, you're going to have to create a business plan and determine how much revenue and profit your ISP can generate. I used to have some numbers here that were helpful guidelines five years ago, but the market has grown so much since then that I don't know what the statistics are. I think we can safely assume that the Internet is here to stay, will soon be as common as a telephone, and has eyebrow-raising potential in the Features department.

In case they are helpful, here is my old analysis of the market from five years ago:

In a city with 250,000 people, an ISP with a fairly agressive advertising campaign could end up with 6,250 subscribers. At this level, a 9-to-1 ratio (nine subscribers for every phone line) should provide a premium service with no busy signals. With this ratio, 696 phone lines will be needed (6250 subscribers divided by 9, rounded to the nearest 24 lines). At a subscription rate of $20 per month the revenue figures look like this:

The above values are consistent with our knowledge and experience, but every city and situation will be different.

A similar table can be found on the web site of another networking equipment manufacturer (Cisco). Their figures for an ISP in 1999 with 100,000 56k subscribers at $22 per month (plus a $25 installation fee) and 1000 high-speed (e.g., wireless) subscribers at $3000 per month (plus $2000 installation fee) look like this:

These figures show about the same overall profitability. Of course, the critical job of marketing your services to prospective customers is key to obtaining any profit, but this document does not discuss marketing. You're on your own there.