by Dana Blankenhorn
Volume V, No. XIV
For the Week of April 9, 2001

This Week's Clue: The Suburban Net

This Week's Clue: The Suburban Net

SSP (Shameless Self Promotion)

The Big ISP Opportunity

The Rearguard Action

Fear and Complacency

Clued-in, Clueless

I have remarked before how Internet commerce mirrors suburban development patterns. Sites expect to be either freeways or cul de sacs, preferably some of both. 

Portals are like freeways where users zip through pages as quick as they can. Other sites are cul de sacs that seek to control users by refusing outgoing links, putting all links in a target tag (destroying links to previously-visited pages) or, increasingly, mousetrapping so a browser back button leads back to the same page you were at. Other sites are now charging for access that was previously free -- those are your gated communities. 

Increasingly Internet law is mirroring the suburban pattern. Speed limits are posted but no one obeys. This gives the few cops on the road carte blanche to arrest anyone. A profile used to hassle Internet users is slowly developing - young, male, disconnected, secretly rebellious, a geek. The Internet police tend to stage a lot of raids (both real and virtual) on the basements of real suburban cul de sacs. This is supposed to frighten everyone else into obedience.

The problem, as we've seen, is it does nothing of the kind. Traffic doesn't slow down on the suburban roads. Instead laws are neither obeyed, nor respected. On the net encryption is used like a radar detector. People continue as before, but they may become increasingly agitated. 

As you can see from the confusion in the paragraphs above these Internet values are now entering our real lives. Crooks and cheapskates use plastic "street spam" to turn parks and public corners into billboards. (The smartest ride crews on top of trucks to hang the signs high with plastic nails.) The growth of "fax spam" is now mirroring the growth of online spam. (Often those offers are no more honest.) The people who are abusing consumers will, when caught, demand protection as "small businesses" but in fact their abuse puts all small businesses into disrepute and pushes consumers into the arms of uncaring, big businesses. 

All this again reflects back to the Net. (This is the true integration of the online and offline worlds - trends bounce off one another.) AOL continues to throw off cash flow, its bureaucrats (and their ham-fisted anti-spending attitude) proliferate at Time-Warner (killing the company's long-term prospects in favor of short-term thinking) and the whole outfit moves to "take over" the music business . The attempt by some sites to up-sell, a perfectly valid proposition, is spun as a set of giant toll booths - one more reason not to go online (The publisher of the linked-to story runs a notorious cul de sac, and that link may have expired by the time you read this.) 

The noise obscures the real problem and the real opportunity. The problem is that laws against Internet behavior are overly-broad -- that's why they are widely ignored. The opportunity lies in smart growth - building a user base that trusts you, trusting the Net, and then using that credibility to offer valuable services for a fair price. Fortunately it's easier to do smart growth online than offline. 

SSP (Shameless Self-Promotion)

Boardwatch  has launched its newsletter under my byline called ISP Executive. Check it out. I'm also doing a series of features for Advertising Age this month on new media technologies. If you want to be interviewed for it give me a call.

Join the A-Clue.Com discussion at I-Strategy , our shared e-mail digest produced with Audettemedia. You can also read me daily at ClickZ , monthly at B2B, and Boardwatch, and once every two weeks at Internet Content. (More deals are being negotiated as this is written, so call me at 404-373-7634 to get in on it.) Remember that it's journalism that keeps the Clues coming...

Takes on the News

The Big ISP Opportunity

The biggest opportunity small ISPs have had in some years is here.

It's home networking. Even if someone signed on with a local cable company or Bell outfit for their broadband service, a small ISP can still market to them, and encourage them to switch. The "equal access" rules aren't just there to assure competition in initial account set-up, but to guarantee that the competition will continue afterward.

The problem is the telcos don't understand the real promise in service and up-sells. Many offer DSL service on the provision it not be connected to a home network, but it's in provisioning and servicing such networks where the real opportunity lies. (Earthlink has it half-right , but this is not just an up-sell, it's a long-term small ISP strategy.)

You can start with security. Steve Gibson, known in the 90s for his columns and Spinrite disk tool  is back for more with "Shields Up" , a security solution for home networks. For small ISPs, dealing with other small companies like Gibson's is a much easier deal than dealing with big companies, because he'll respect other small companies.

The dangers for broadband customers are real but so are the opportunities in building, servicing, and extending home networks. If you become a homeowner's trusted network advisor, you can extract a huge amount of money in the next few years for each one of those customers. Start with small projects, done practically at cost, and you'll be promoted into larger and larger projects with larger and larger profit margins. (You'll also be recommended to others -- it's free money.) In the past ISPs sought this opportunity by partnering with CLECs, but as the NorthPoint collapse proves size is no guarantee of health.

The best guarantee of success is not the service others give, but the service you give. And if you can't get into this market through phone, cable, or wireless, try the power line .

The Rearguard Action

The collapse of sites like Wine.com  (originally Virtual Vineyards) proves that existing distribution channels can destroy Internet competitors, using the power of government. But it also provides a wonderful opportunity for Internet retailers to fight a negative image and score points for the consumers they claim to represent.

All kinds of industries are now fighting for protection from Internet competitors, and they're winning . These laws, whether passed on behalf of auto dealers, optometrists or auctioneers, are aggressively anti-consumer, direct restraints on free trade.

Now an important lobbying group has offered to get behind e-tailers. The Progressive Policy Institute, a centrist Democratic organization, estimates 10% of e-commerce failures in the last year were due directly to government interference spurred by brick-and-mortar retailers. PPI vice president Rob Atkinson put the cost of this interference on consumers at $15 billion per year, and said it's growing.

The Federal Trade Commission  plans a workshop on this issue May 8. Don't just go there, organize for it, and follow up. Identify and protect your friends, excoriate and fight your enemies. Do it for your customers, and you do it for your future as well.

Fear and Complacency

A subscriber sent me some notes from Harvard Business School professor Michael Porter that well described the fear and complacency now plaguing corporate decision makers.

In some ways Porter and I agree. E-business is just business. E-strategy is just strategy. But the Internet does change everything. It narrows niches. It forces you to be world class within your niche. It speeds the pace of all change. It increases competition. It lowers profit margins for everyone. Failure to adapt to these changes - fear of change or complacency in the face of change - mean death.

The name of the game is profit, and the Internet by itself doesn't generate profit. But it's not a barrier to entry - in fact it lowers financial barriers. The real barriers in an Internet world become intelligence and the ability to move quickly based on intelligence. Porter writes "In many cases, the Internet complements, rather than cannibalizes, companies' traditional activities and ways of competing." That doesn't mean your present offline strategy isn't constantly open to question. It means your offline strategy may have to change with online speed.

"Basic Internet applications will become table stakes - companies will not be able to survive without them, but they will not gain any advantage from them," Porter concludes. "The 'new economy' appears less like a new economy than like an old economy that has access to a new technology." Yes and no. The old economy didn't take over the new: the new took over the old.

Don't let people like Michael Porter deceive you into thinking that this Internet thing is now all-gone and you can go back to the same-old same-old. Nothing can be further from the truth. I'll say it one more time. The cost of complacency is death.

Clued-in, Clueless

Clued-in is Gene Hoffman of ZDNet , who called for a compromise in the digital music holy war. As with Israelis and Palestinians this is a war that can't end in total victory or defeat for either side. Total war means total defeat for both sides.

Clueless is Major League Baseball, which is charging for radio play-by-play online. Baseball needs more fans yet it's more interested in squeezing the last dollar from current ones. The whole game is going down the tubes with that attitude.

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