The scope of services offered by Internet service providers (ISPs) has broadened immensely over the years, but they are as old as the Internet itself. "In fact, the Internet can be viewed as the sum of all ISPs," says MTN Networks CEO Mike Brierley.
The Internet is a network of ISP networks intermeshed and linked to one another, says Peter Davies, MD AT&T's operations in SA. "The Internet defies ownership and dependency on a single service provider. This is its reality and its beauty."
According to the CIA's World Factbook, at the end of 2002 there were 11 679 ISPs around the world linked by more than 33m servers and routers. These ISPs provide connectivity to more than 170m Internet user addresses or "hosts". Host addresses are regarded as the most accurate way of assessing the size of the Internet and each address provides access to a global average of about 3,4 users - about 580m people.
This is a far cry from the Internet's humble beginnings in 1969. That year, the first embryonic ISP, the US Defense Advanced Research Project Agency, Arpanet, saw the light of day. Arpanet connected Stanford Research Institute in San Francisco, the University of Utah, and the University of California's Los Angeles and Santa Barbara campuses.
Arpanet was intended primarily as a scientific data transfer tool, but its main application soon became e-mail, establishing one of the main pillars of commercial ISP services.
By 1979 a US-based ISP, Usenet, was routing e-mails from newsgroups all over the world. Four years later, the introduction of TCP (transmission control protocol) and IP (Internet protocol) led to the adoption of the name Internet by a rapidly growing global family of interlinked ISPs.
Today the total number of South Africans with Internet access is estimated at 3m. This has created an ISP market worth about R1,5bn/year, says Brierley. The corporate sector dominates and represents about 80% of all revenue generated.
E-mail still represents a big chunk of the revenue, says Brierley. At a cost of about 2c/e-mail this sector of e-commerce and communications has undoubtedly eroded much traditional telephone usage, he says.
SA's Internet Service Providers' Association (Ispa) has 57 member ISPs. Of these, 11 are termed "large members", three are medium and the remainder small. Of the "big four" ISP players - Telkom, UUNet, Internet Solutions and MTN Networks - Telkom remains conspicuously absent as an Ispa member. Telkom has declined invitations to join, says Ispa co-chairman Greg Massel.
Smaller ISPs piggyback on wide area networks (Wans) operated by large ISPs. In turn, SA's large ISPs link up to the global network through mega-ISPs in the UK and the US, says Massel.
One of these global giants in the ISP and telecom network space is WorldCom, which filed for bankruptcy in spectacular fashion in 2002. WorldCom's woes bust the cover on many Internet fallacies, which were created during the 1990s, says Davies.
One fallacy is the Internet's vulnerability to the collapse of a big ISP, says Davies. Given expectations of further telecom bankruptcies and network shutdowns, doubts raised among users and policymakers about the strength of the Internet and IP infrastructures are of concern, he says.
Most significant of the urban legends is that WorldCom carries 50% of the world's Internet traffic. It certainly does not, says Davies. "But this nonsense continues to show up in reports, filings and the media."
This claim still adorns the website of WorldCom's UUNet subsidiary website in SA.
Davies says: "At least eight ISPs, including WorldCom and AT&T, carry about 55% of the Internet traffic in the US, which is by far the world's leading market." WorldCom's share of the US market is between 13% and 15%.
If WorldCom were forced to shut down its network as part of the bankruptcy proceedings, the Internet would be in no danger at all. It would continue to operate without a hitch, says Davies.
"The top-40 service providers could easily absorb WorldCom's traffic. AT&T could swallow the load itself."
Davies says that should WorldCom be forced to shut down its network, AT&T has the ability to transfer ISPs dependent on the former's services at the rate of one subscriber/second. AT&T demonstrated this ability in 2002 when it transferred 1m subscribers from Excite@Home onto its system.
The shutdown of a major backbone carrier network is not without precedent, says Davies. In Europe KPNQuest, which ceased operating recently, claimed to have a 50% share of European Internet traffic. "The spectre of dire consequences were held out, but it closed down and the Internet in Europe still works perfectly."
Another fallacy concerns the rate of Internet traffic growth, says Davies. "The notion that Internet traffic was doubling every 90-100 days was a mid-1990s phenomenon." This growth pace had ended long before companies, suppliers and investors bet their assets and business plans on the promise of unabated exponential growth.
Davies says traffic is growing at about 85%/year. "The companies that still spread traffic growth and technology myths after their houses of cards have collapsed shouldn't be allowed to help rebuild the stack."
The results of overambitious dreams of growth and expansion are also evident in SA's Internet community. SA's ISP market is highly competitive and is experiencing a "price war", says Brierley. Internet service provision has become a commodity and clients are price sensitive. "Those who remain pure ISPs will struggle to stay in business."
Internet Solutions chief operating officer Jason Goodall warns that companies should carefully consider their ISP's financial stability. He says it is not only a question of a provider going out of business. There is also the danger a financially weak ISP will have to cut service levels and be unable to finance research and development. This in turn would make it difficult to attract people with the right talent and skills.
Larry Paslovsky, general manager of business services at Tiscali (formerly Tiscali World Online), believes competition will get tougher.
His group aims to be one of the companies taking on companies that grew fat on easy pickings during the boom years. "We are attacking the client bases of the large ISPs."
He says at the height of the scramble to gain a web presence, many companies entered into contracts with ISPs "at ridiculously high fees".
Many of these contracts are now expiring says Paslovsky and companies are now looking for better value from their ISPs. "We are aggressive on price and aim to grow our business-to-business division by 60%, and the overall group by 30% this year," he says.
Not surprisingly, consolidation has already reduced the number of large and medium-sized Ispa members. But over the past two years, there has been strong growth in the number of smaller virtual leased-line Internet service providers (VLL ISP) that piggyback on the dial-up infrastructure of large ISPs.
Brierley says a VLL ISP does not need the infrastructure and expertise that can require substantial investment and many years to develop.
But, far from shunning the concept, he views VLL ISPs as opening new paths for expansion. "Large ISPs can no longer rely on only their reputations to grow their business. The leased-line market is fairly saturated in terms of the obvious corporate users."
Brierley believes VLL ISPs that have specific client relationships provide an ideal vehicle for reaching an untapped market for leased lines. By working closely with them, he says, MTN Networks is reaching a previously under serviced new client base.
SA's first big VLL ISP hit the market with the launch of Absa's then-free Internet service in 2001 for which ICL provided the support backbone. ICL's Eject has taken the VLL ISP concept to a three-tier level, says ICL infrastructure service manager Mike Semple. He says ICL provides a middleman technical infrastructure support service, but uses network bandwidth supplied by Internet Solutions. Clients are then free to run their Internet access under their own brand name.
