ISP OT Analysis

Opportunities

Relationships with telcos Mergers with content providers

Buyout

Acquire smaller enterprises Development of web applications

Threats

Entries of telcos/ cable companies Some Market Squeeze Saturation of the market

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Opportunities:

There are massiveopportunities in this industry for allcompanies.For large ISPs, relationships with telcosare becoming manifold. Telcos want to enter the market, and ISPs do not want torun the risk of losing out to the telcos, somany partnerships arise.

Mergers with content providers are alsooccurring. This is the easiest way for bothtypes of company to make their way intothe other‘s market.Those who set up an ISP before the ‗gold rush‘may wish to be bought out.

Example, An acquisition of Infotel (ISP) by Reliance Industries and took part in the bidding process of 3G spectrum allocation & grab the highest number of spectrum nationwide.

Therefore, if anISP acquires a number of smallercompanies, its increase in value faroutweighs the price of the companiesalone. As there are many small companiesthat may wish to be bought out, there isopportunity here for those that can buythem.

Because large ISPs have the resources andthe know-how, they may wish to developweb applications as well as new Internettechnologies. Certain applications couldprove to be very attractive, particularly ifthey were provider-exclusive.There are usually opportunities for largecompanies to branch out into otherindustries. Large ISPs may wish toconsider related industries in the generalarea of computing. When moving into arelated area, brand name and customerbase can be invaluable.

Threats:

The largest threat to large ISPs isthe entry of other established companies, such as telcos and cable companies intothe market. These companies have goodexperience, may have large resources, andmay have the ability to buy ISPs out. There is to be some market squeeze, whichwill result in only those that are providingsomething special surviving. ISPs canmerge, acquire and partner, but there isstill the threat of losing out in animmensely competitive market. Eventually the market will becomesaturated. This may not happen for someyears, but small ISPs that have found aniche will survive, and large ISPs thathave sufficient power will survive andthere will be no place for others.Large ISPs are in a position now wherethey can grow and

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make a profit, but thereare still areas in which they can improve,and they are still at a great risk of losingout to new entrants.

Broadly speaking, ISPs face threats/challenges in four inter-related areas: customer relations, technology, regulatory framework, and resources

Customer Relations

Volatile customer satisfaction Customer churn, customer trust Need for differentiated services

Technology

Integrating ever changing technologies Delivering new services in real time

Developing and managing rapidly expanding Infrastructure

Resources

Telcos have more resources Acquiring capital investment for Infrastructure

Hiring experienced employees

Regulatory Framework Censorship of the Internet Responsibility for content

Possible charges for services such as VOIP Uncertainty

Fig. 8.2 Threats to ISPs

All four areas are of significant importance.

 Customer Relations

From a service point of view, good customer relations are necessary. Theretends to be volatile customer satisfaction of ISPs, and no matter what technologyand services are available, customers willnot stay with a provider they aredissatisfied with.

Customer churn is a huge problem, particularly among large ISPs, and can be over 30%. Because it costs so much towin customers, it is very important that anISP holds on to the customers it has. Because customer demands are onlytemporarily gratified by new technologies,there is always a need for new services inorder to keep the customer satisfied.

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 Technology

For obvious reasons, technology is ofsignificance.ISPs have to figure out how to integratethe available technologies and providethem in a satisfactory way. This is an on-going challenge, as technologiescontinue to change.

As new services emerge, ISP must come to terms with delivering these in real time.They must always be aware of thedevelopments and management associatedwith a rapidly expanding infrastructure.

 Resources

Large ISPs, particularly those which are part of another company such as a telco,have large amounts of capital. Thisgenerally enables them to acquirenecessary resources. Issues such asupgrading technology may be a hugechallenge to small ISPs who, although they may be efficient and profitable,cannot afford to make large investments.

Acquiring capital investment for infrastructure will be a great challenge formany ISPs.The lack of experienced employees mayalso be a problem. In such a new area, itis not surprising that the number of totallyqualified potential employees is low. Thiswill, of course, change.

 Regulation

The intervention of the regulator will raisenew issues and challenges. Because theInternet is so unregulated, it is hard topredict what effects regulation will have,but it will probably result in some sort ofcollaboration between ISPs and regulatorsregarding content control and other issues. Charging above that of today is also likely to result, associated with value-addedservices such as VoIP.

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Conclusion: Opportunities

Relationships with telcos, Mergers with content providers, Buyout, Acquire,

Example, An acquisition of Infotel (ISP) by Reliance Industries and took part in the bidding process of 3G spectrum allocation & grab the highest number of spectrum nationwide.

Smaller enterprises, Development of web applications

Threats

Entries of telcos/ cable companies, Some Market Squeeze, Saturation of the market.  Customer Relations

 Technology  Resources  Regulation

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