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  • Fast Forward
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    Fast Forward's Rob Pegoraro Discussion:
    PressRoom Online's Greg Gibson.

    Friday, April 30, 1999 at noon.

    Rob Pegoraro

    Why are there so many Internet service providers to choose from and why are so many of them so awful at the basics? Why does every high-speed connection option ISDN, satellite, cable, ADSL come with so many strings attached? What does your $20 a month bill actually go towards?

    My guest today, Greg Gibson, understands the nature of the beast. He's president and founder of the PressRoom Online Services, a Chantilly-based Internet-service provider. A two-time Pulitzer Prize winning photographer for the Associated Press, Gibson started the PressRoom in April of 1994 as a bulletin-board service for area journalists.

    Gibson joined us to talk about the short but colorful history of the ISP industry, why fast connections have been so hard to find, what it's like to run an Internet-access company, where the market might be headed, and what all that could mean to you at home.

    For background, read this week's Fast Forward and past discussions with Pegoraro.

    Discussion Transcript

    Rob Pegoraro: Good afternoon, welcome all, in our first-ever appearance sharing this noon time slot with Carolyn Hax of "Tell Me About It" fame. Carolyn talks about dysfunctional relationships and we're going to do the same today--in this case, the Internet-access business, which, as our guest can attest, can be one strange place. On with the show...


    Silver Spring: Why is there such disparity between high-bandwidth services like DSL and cable modem access in counties like Northern Virginia and Montgomery County? I have seen reasonable rates from Bell Atlantic while their competition spouts tremendous price increases; and while Fairfax has reasonable Cable access, Montgomery County is way off the charts for their access. Are any of these guys a ripoff?

    Rob Pegoraro: Greg can talk about that; his company offers a few different kind of DSL service, some business-grade and some consumer-grade. As for cable-modem pricing, the Montgomery/Arlington rate is, frankly, uncompetitive, especially since it's for one-way access only. Given that this is a capitalist economy we live in, I would expect those prices to drop before long.

    Greg Gibson: Bell Atlantic began from the start with a residential ADSL offering. The competitors that have come in, such as Covad Communications, were initially offering business class services. Covad recently launched a residential ADSL product that is competitive with Bell Atlantic...384/128k for $59.95 and a 768k/384k for $79.95.

    The disparity in cable costs results from different cable company offerings, and as Rob pointed out, the quality/type of service varies greatly.


    Alexandria, VA: Are you aware of any free ISPs that provide dial-up services for home users?

    Rob Pegoraro: There's been a bunch of providers that have tried to do this, but failed (@bigger.net, for instance). The latest is one called NetZero, which is apparently doing quite well. I don't think the concept is inherently unsound--in the U.K., a company called FreeServe has had great success. It's not something that I personally would use, though; I use my e-mail heavily enough, and I am picky enough about what I want in an ISP, that I'm willing to pay a fair price for it. Greg, what's your take on free ISPs? (I mean, besides that they might take away some of your business :)

    Greg Gibson: Well...NetZero has an interesting concept. The problem with the free Internet model in our company has been that it doesn't scale like traditional advertising based services such as television and newspaper. In the TV and print industries, the costs are fairly fixed or increase marginally to service a larger customer base. With the free ISP model, the problem has been that as you gain customers, you have to grow your infrastructure (more modems and phone lines). So far the income from advertising has not been able to keep up with the demands for access, and that's why these types of services have failed in the past.


    Denver Colorado: I am currently a subscriber of 768k DSL in the Denver area and am currently paying $120-month. I checked out the rates for Bell Atlantic and it lists for about half the price. What do you think will drive down the price of consumer DSL and what will it take to for more widespread adoption of both DSL and high speed cable access?

    Rob Pegoraro: Sounds like Denver is paying for a business-grade service there; I thought US West's consumer rates weren't that high. This business/consumer service is something I didn't address so much in my story today... basically, these high business/pro rates bring you more of a commitment that you'll always get a certain level of bandwidth, plus more handholding and support and the ability to use that connection to wire up your own network. If you're not running a home business off a DSL connection, of course, those factors are not so important. And I suspect that my guest can elaborate on these points...

    Greg Gibson: It does sound like you are paying for more of a business class service although 768k for $120/month is still a bargain :-).

    Our market here in the DC area, which Bell Atlantic serves is extremely competitive. I suspect Bell Atlantic wanted to get ADSL out to the public quickly at a reasonably low cost to 1) educate the public about the advantages DSL offers over cable, and 2) grab some market share before cable becomes available. Obviously we think DSL is a better product than cable, but one obstacle has been that cable has gotten a tremendous amount of publicity over the past few years while the average consumer knows very little about the potential of ADSL. As more people get educated about DSL, they will see it's a better product.


    Rob Pegoraro: We're about halfway through our chat with Greg Gibson, president and founder of PressRoom Online Services, a local Internet service provider.


    Rob Pegoraro: Greg, one thing I've heard a lot of from people running local Internet service providers is that Bell Atlantic can be very hard to deal with when it comes to setting up an ISP for ADSL access. That, they say, is one reason why the choice of ADSL-compatible ISPs is so limited. What's your experience been with Bell Atlantic?

    Greg Gibson: Initially, we found Bell Atlantic very difficult to deal with in getting started. It took a long time for us to get setup with them, as far as provisioning a circuit into their network and getting all the nuts and bolts in place. We originally expressed interest in becoming an ADSL partner last October, but it has taken until April to get up and running with it.

    At first we thought that maybe it was a competition issue and they were just jerking us around while they signed up customers at Bell Atlantic Internet...but now that we are up and running, I have to say they have been much more responsive and are actually referring customers to us. We now feel we really are in much more of a "partnership" situation.


    Rockville, MD: In the wake of mid to larger sized ISP operations being bought out by National companies, what does the future hold for locally based ISP's like the Pressroom?

    Rob Pegoraro: A lot of the local companies have been bought out in the last few years--Digex, ClarkNet, Internet Interstate, CAIS, etc. etc. Thing is, the services and support offered by these firms often changes after the acquisition, as Digex's customers can attest.

    Greg Gibson: Yes, focus often does change after acquisition...you can ask Clarknet and Monumental customers how they have been treated since the Verio buyout.

    I predict you will see many more acquisitions of these types over the next couple of years. Many companies are now trying to buy up multiple ISPs with the idea of getting a large customer base and then going public. The motive here is simple, in the open market an ISP customer is worth about $200-250 each. On the stock market, however, these customers are worth $1000-2000 each...this was the strategy behind the OneMain.com IPO.

    More and more often we are being approached by companies interested in buying us, but so far we haven't seen an offer we like. Our current strategy is to get big into DSL and we intend to be a strong regional player in that market.

    There will always be a market for small, aggressive ISPs. The big boys just can't provide the level of personalized service most people have come to expect and it is often difficult for the larger companies to respond to rapidly changing market conditions.


    Herndon, VA: Is there any type of ISP service cheaper than that of Media General Cable's RoadRunner, but still faster than the usual AOL-Erols's-type telephone line service?

    Rob Pegoraro: Well, Road Runner (and most two-way cable-modem systems) run $40 a month for unlimited access. AOL, Erol's and whatnot cost $20. Thing is, if you spend enough time online, a second phone line becomes a necessity--so the cost of Internet access is really still $40. So the answer is really no, pending bigger discounts on ADSL service than I've seen yet.

    Greg Gibson: My understanding is that to get Roadrunner, you have to first be a cable customer...so add the cable costs to the Internet costs and the price difference between a DSL connection and a cable connection are not so vast.

    As a quick pitch, we have a deal available right now where you can get a free year of Internet service...so all you have to pay for is the $39.95 ADSL phone line.

    I would also like to mention some inherent limitations in cable access. First, cable is shared bandwidth. Everyone in your area uses the same connection. It's fast when you're the only one on, but slow during peak times. Also, there are some security concerns. All the packets destined for your computer also bounce off your neighbors computers. It's possible to run packet "sniffers" which intercept information being passed on the network.

    With a DSL connection, you have your own, private dedicated line. Your circuit is always capable of doing the speed it was designed for (subject to conditions on the Internet).


    Washington, D.C.: Let's cut to the chase here. I'm schlepping along with a 28.8 modem at home, hatin' life, because I don't know what my best next move should be. I don't do this stuff for a living, would like faster access but don't want to pay much. Greg, what can you sell me? Rob, what should I buy?

    Rob Pegoraro: I know how you feel; I'm still using a 33.6 modem at home myself (after a free upgrade to my 28.8). I've been meaning to buy a 56-kbps modem, but now, realistically, I'm thinking that I might as well put that money towards an ADSL connection... and so the stalemate continues. Greg, can you help this fellow out?

    Greg Gibson: I understand that this is a tough choice for many. One problem with DSL is that it is not widely available. Probably over 1/3 of the population in this area will not be able to get DSL due to current distance limitations.

    I recommend DSL to you. We have a great special that includes free Internet, but first we need to qualify you to see if you meet the distance requirements.


    Rob Pegoraro: Your company started off as a BBS--a bulletin-board service--for a specialized audience, journalists (hence the name). What made you decide to jump into business in '96 as a public-access Internet provider?

    Greg Gibson: As the net boomed in '96 our customers kept asking for more Internet options...world wide web, email, usenet, etc...so we offered that to them. After doing so, our customers started finding better resources on the net and our journalism niche went away. As a result, we decided to open the modems to the general public and here we are today.


    Rob Pegoraro: Greg, about those DSL distance limitations you just mentioned: How many customers have you had to turn away because they're too far from the nearest phone-company "central office"?

    Greg Gibson: We probably turn away about 1 out of every 4 people who call for DSL but le's clarify that a bit. There are two limitations to DSL...first, it has to be offered at your local central telephone office. Second, you have to be within 10,000 feet of that central telephone office.

    That said, we have a 144k residential product through Covad that we can extend out to 36,000 feet. However, it's a bit more expensive, at $89.95. The 144k is a symmetrical connection, in that it does 144k in both directions. If you take this product into consideration we qualify a LOT more people.


    Also, Covad service is available in many more areas than Bell Atlantic...so people who may not qualify for Bell Atlantic service may VERY LIKELY qualify for Covad service.


    betheda,MD: What is the cheapest, most reliable ISP....comments on the Red Hats new personnel.

    Rob Pegoraro: Can't say much about the second half of your question (I assume you're talking about the people at Red Hat, a company that packages and distributes the Linux operating system). As for the first half, that's the question I am asked more than anything else. I wish I could get paid for every time I answered it--except my answers aren't worth much. I don't know who's cheapest *and* most reliable, although I can certainly tell you who's cheapest. And I know a few providers that I hear are as absolutely reliable as one could hope. Thing is, there are certain minimum costs associated with running an ISP. You can't charge less than that without customers paying extra in some other way, it seems to me. Greg, what's your take--for instance, if you charged $5 less for a regular dial-up account, what would you have to give up or not do to afford the reduced income?

    Greg Gibson: That's a great question and all ISPs struggle to find the balance between price and service.

    By charging $5/month less we would have to cut back on tech support personnel and would have to run our modem ratios higher. Also, we would have less operating capital to build infrastructure as we grow.

    We tried doing the $10/month thing for a while, but found that it just didn't generate the cash flow to provide the service customers expect...and people *do* demand a lot of service for the price of their Internet connection.


    Rob Pegoraro: I'm imagine you've gotten any number of tech-support questions in e-mail and over the phone. In your experience, what's the most likely thing to go wrong as people are trying to set up their Internet accounts? (Note that I am hoping to get my mom online in the next year or so... I'm trying to figure out glitches I can prevent before she calls me for help!)

    Greg Gibson: The biggest problem we see is with people who buy cheap, cheap modems. Take the analogy of the stereo system. You can buy a great stereo but if you put shoddy speakers on it, it will sound shoddy. Put a cheap modem on a great PC and you'll get a problematic Internet connection.

    The other thing is the make sure your modem has the most up to date firmware and drivers. Even if you buy your modem new, go to the manufacturer's website and download the latest drivers and firmware. We keep our modem code current, and the end user should as well.


    South Riding, VA: I live in Loudoun County and seem to be just past the edge of fast service providers. Our cable system won't have bidirectional access until "sometime in late 1999" Are there any options for a bandwidth hungry consumer now?

    Rob Pegoraro: Hmm. You might not be within range of your local central office, you might not. (Phone companies don't publish maps that would let you easily check this, but you can try plugging your number into Bell Atlantic's ADSL page .) If ADSL doesn't work for you and you don't want to wait for cable, one option is the DirecPC system I mentioned in the article. (See http://www.direcpc.com for details.) It uses the same small-satellite dish technology as DirecTV or Dish Network, but instead of HBO you get 400-kbps downloads. But you still need a modem for outgoing data (which may also mean you'll need to pay for a second phone line) and the $50 price plan only covers 100 hours of use a month. For some that's more time than they'd ever want to spend on the Net, for others it's not even close to enough. Greg, anything I'm missing here?

    Greg Gibson: Covad may reach parts of Loudoun County. As I said, Covad service is, and will be, available in many more areas than Bell Atlantic.

    If this person will send their telephone number and complete street address to sales@pressroom.com we'll prequalify them to see if service is available.


    Washington, D.C.: OK, let's say I do meet the distance requirements -I'm in Md. suburbs-. What will it cost me, if I'm just a guy who occasionally does work from home, fools around with eBay, plans vacations, diddles with my portfolio and looks for lost schoolchums? Like an hour a night? Is DSL way too much for a guy like me? What's better and cheaper?

    Rob Pegoraro: Yes, the "appropriate technology" angle. Often gets lost in discussions of who can connect you the fastest. Whaddyathink, Greg--at what point does DSL become overkill? Should this guy stick with his modem?

    Greg Gibson: Good quality 56k modems are just fine for the occasional web browsing and email reading consumer. If you're an online gamer, a heavy web user, or you download a lot of files then DSL will cut your online time down considerably.

    One thing to remember is that if you have a second phone line that you use for your Internet usage, you can get a DSL line and do away with this second phone line and then the cost difference does not seem as great.


    Arlington, Va.: My Internet provider keeps on
    disconnecting me--the modem
    just drops off line like that
    while I'm checking email or
    whatever.

    Whats going on to make this
    happen? Is there anything I
    can do to stop

    Rob Pegoraro: That's no fun at all. What's the story with modem disconnects, Greg?

    Greg Gibson: Modem disconnects can be caused by a number of things. I can tell you that no ISP intentionally disconnects people who are actively using the connection. Now they may disconnect you if no traffic passes through the modem for a set period of time, say 20-30 minutes, and I think that's fair.

    Sometimes the answer is as simple as a firmware/driver upgrade or tweaking the init string. It's just very difficult to say.


    Arlington, VA: I understand that America Online is going to jump into the ADSL market by joining up with Bell Atlantic. Reportedly, they are going to offer the service at around $40, about the cost of an ADSL connection alone. How are other ISP's going to compete with that pricing?

    Rob Pegoraro: This is part of a co-op deal Bell Atlantic signed with AOL; Bell Atlantic wants access to AOL's customer base, so they're willing to discount the price of ADSL for those folks. For people currently paying for a second phone line, getting this AOL ADSL could actually *cut* their Internet costs. Of course, if you don't like AOL this might not be so attractive, just annoying...

    Greg Gibson: We are offering FREE Internet service for a year. That's a pretty good deal I think :-). All you have to pay for is the ADSL phone line at $39.95. Pretty competitive, eh?


    Rob Pegoraro: Well, that's about all the time we have left for today. Join us again in about two weeks; as ever, if you've got questions we couldn't get to today, you can e-mail me at rob@twp.com. Take care, y'all...

    © Copyright 1999 The Washington Post Company

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