Recently, AT&T and MCI made their intentions of going after the growing Internet access market loud and clear. AT&T is offering all residential long-distance customers who sign up for its WorldNet Service in 1996 five free hours of Internet access per month for an entire year. And MCI is touting similarly competitive plans for its long-distance customers.
What does this mean for the approximately 3,000 existing Internet service providers (ISPs), many of whom are small entrepreneurial companies? "To the entrepreneur, AT&T and MCI present a formidable challenge," says Don Heath, president and CEO of The Internet Society, which seeks global cooperation and coordination for the Internet. "They've got the resources and the capabilities to offer services entrepreneurs can't."
Heath expects to see a number of smaller access providers merge during the next few months. Many ISPs in competitive markets, he says, will also be forced to reposition their services.
Still, while AT&T and MCI are liable to snag a sizable share of the market, a number of small companies providing Internet access don't feel too threatened. For instance, Jennifer Kraljevich, president of Tezcatlipoca Inc., a Chicago-based Internet service provider with about 1,500 customers, believes her clients, who are primarily businesses and "more serious customers than just the casual Web browser," are different from potential AT&T and MCI recruits.
"They'll tend to get people who are less interested in being on the cutting edge and more interested in just access," says Kraljevich, 29.
"From our perspective, the market for Internet services of any kind hasn't even begun to reach saturation," Kraljevich says. "So all they're really doing is getting more people interested in the concept."
Moreover, industry insiders believe entrepreneurs have several advantages over the big guys. "Entrepreneurs can provide value that typically the long-distance companies can't," says Heath. "To remain competitive, entrepreneurs must provide the greater services PC owners are looking for."
Some of the incentives entrepreneurs can offer include exclusive content and even building Web sites for their customers, says Heath.
Kraljevich intends to expand her client base by continuing to target business customers, as well as offering them additional services such as help with building Intranets. "I don't think these are services America Online, AT&T and MCI will be offering any time soon," she says.
Some regional ISPs are forming associations to discuss industry developments. "There's such a huge market potential of clients to come onto the Internet that we're not afraid to communicate," says David Jemmett, co-owner of Goodnet, an ISP in Tempe, Arizona, and a member of the Arizona Internet Service Providers association. "That may not be the case in the future, but today we might as well take advantage [of the situation] and become allied competitors rather than defensive competitors."
Most in the industry agree, however, that one of the best ways entrepreneurs can compete is through customer service. Firms that deliver ongoing technical support and customer service with a personal touch (and no busy signals) are likely to be a big draw.
"In the long run, your reputation is what you have to uphold," says Kraljevich. "The idea of trust and having a sterling reputation is one that is never going to be out of style."