The ISP Dilemma (adapted)

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It seems of late that Internet Service Providers (i.e. ISPs) are facing some very difficult choices that could either completely change their business models at best, and / or undermine their ability to operate as independent, viable business entities at worst. The biggest challenge by far is around the growing perception of ISPs as de-facto […]

It seems of late that Internet Service Providers (i.e. ISPs) are facing some very difficult choices that could either completely change their business models at best, and / or undermine their ability to operate as independent, viable business entities at worst.
The biggest challenge by far is around the growing perception of ISPs as de-facto gatekeepers of the Internet, which effectively adds another layer of complexity to their traditional / core business. As a result, not only do ISPs have to deal with existing non-trivial issues (e.g. declining markets, convergent evolution via multi-play business models, and issues around increasing broadband / bandwidth consumption), they also have to contend with the fact that:

  • Content owners want ISPs to play a more central role in preventing, detecting, monitoring and punishing illegal file sharing (e.g. via schemes like the infamous three strikes proposal).
  • The Digital Britain interim report has called for the creation of a UK Rights Agency (to be funded by ISP Levy) that will monitor the activities of suspected copyright infringers.
  • There are also signs of lack of trust by ISP customers over service quality / charges, and potential invasion of privacy

These all add up to a severe headache for ISPs, both now and in the future, therefore some of the options they might want to consider in dealing with these challenges, includes:

  • Reduce costs – E.g. via opt-in targeted advertising schemes to help subsidise the cost of service (perhaps even extending to “free” access)
  • Stronger industry self regulation – Not easy to do, but would benefit the entire industry, and help address the pressure from content owners
  • Maximise network use / value – Invest in better ways to track, monitor and control network traffic, in order to deliver better quality of service, promote fair use, and support law enforcement
  • Partner with content owners – To explore new and more flexible content business models. E.g. a recent survey found that music fans actually prefer ISPs as their music supplier over others
  • Embrace innovations – E.g. IPv6 (or Internet 2.0), should help resolve the looming threat of insufficient IP addresses, and deliver improved quality of service.

Regardless of which options, (or combinations thereof), are considered, it is advisable for ISPs to bear the following three points in mind:

  1. Do not alienate or irritate the customer – protecting the customer relationship and keeping their trust will be key to future success
  2. Resist excessive external pressures – Content owners need ISPs as much as ISPs need them, and perhaps even more so.
  3. Take the initiative – ISPs should be more proactive in creating customer-pleasing, regulator-friendly propositions and business models (perhaps by working closely with content owners)

In conclusion, although there is no easy way to prevent what is ultimately likely to be the natural evolution of the Internet, ISPs need to understand that these current challenges also provide great opportunities to evolve and embrace their critical niche in the emerging digital access / content ecosystem.
Disclosure: The above is an adaptation of a soon-to-be-published article, by this author, in Computing magazine.

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