Sirius Business

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Sirius Business

Sirius business

Copyright ©1998 San Francisco Examiner, all rights reserved.

S. F. Examiner


Internet service providers try to capture commercial customers to stay afloat

WHEN ANDREAS Glocker graduated from San Francisco State in 1992, he imagined his future as a successful software maker for a high-profile Silicon Valley firm.

However, when his development venture with software company NeXtInc. faltered four years ago, the Swiss-born computer scientist needed to change his career path. So he bought a T1 computer line and gambled on starting his own Internet service provider business.

Today, his company, San Francisco-based Sirius Connection Inc., is on the cutting edge of the ISP industry, repositioning itself to try to capture more commercial customers.

"We're refocusing," Glocker said. "We want to grow faster."

Like many other ISPs in the Bay Area and across the country, Sirius - which enables 13,000 Bay Area customers primarily to e-mail and surf the World Wide Web - has discovered it can no longer survive and thrive as a business by providing just basic dial-up service to residential consumers for a mere $18.95 per month. Businesses, which require more Internet services, are the new target market.

Indeed, Glocker said ISPs must find new markets for their services because fierce competition in the industry has kept monthly service rates low - about $20 a month on average - and made it difficult for the nation's estimated 4,000 Internet providers to break even, much less turn a profit.

"People begged us for Internet service two years ago," Glocker said. "Now, it's the other way around."

As a result, many ISPs have started marketing expensive services like high-speed ISDN and T1 lines, Web pages and computer server storage to small- and medium-sized businesses in hopes of generating greater sales and earnings.

ISPs say businesses can use more Internet services than consumers can. For instance, companies are more likely to need their own Web sites or send faxes over the Internet than a residential customer.

For ISDN service, which is about twice as fast as a regular dial up-modem, Sirius charges $295 a month. T1 lines, which are 26 times faster than modems, are $495 a month. Sirius also charges $495 to house and maintain a company's computer server - the hardware that stores vital data.

To sell more of these big ticket services, Sirius recently hired six new technical support workers, who answer customer questions. The company also moved its server housing site, known as a co-location site, to a bigger space on Mission Street from its headquarters on Connecticut Street. Glocker said he would like to sign up 100 new business customers a month - more than twice its current number - as well as 600 new dial-up customers to reach the company's financial goals, which he declined to specify.

Other Bay Area-based ISPs also feel pressure to boost their bottom lines.

"Growthwise, we're focusing on the business community," said John Stark, product marketing manager at San Francisco-based Whole Earth Networks, which has 16,000 subscribers nationally.

"We're going toward Internet fax, Internet telephone," he said. "You diversify or you die."

Pacific Bell's Internet division, which has 265,000 dial-up subscribers and a few thousand business customers, also sees a brighter financial future in serving small- and medium-sized companies.

"On the dial-up side, we make money," said Steven Hubbard, president and CEO of Pac Bell's Internet arm. "But there's even more profit potential on the business side."

All three ISPs say they will continue to provide high-quality service to dial-up customers even though their strategy is to focus more of their marketing on small- and medium-sized businesses.

"We're going to continue serving dial-up customers," Glocker of Sirius Connections said. "They're sort of the bread-and-butter for us."

Analysts said targeting business customers makes financial sense because some services don't cost much to provide.

For example, Hiep Luong, an analyst at Dataquest Inc. in San Jose, said helping a customer set up a Web site is simply a matter of renting computer disk space.

"It doesn't tie up another phone line, and (ISPs) can charge an extra $10," Luong said. "These value-added services may not require heavy capital investments, and they can bring in dollars."

Whether ISPs can get the business clients they need to fuel their sales and profits is another question. Analyst Luong said some businesses may not need to be hooked up to the World Wide Web.

"Finding the businesses may not be a problem," Luong said, "but educating them is another proposition. You have to convince Joe Mechanic that he needs a Web site. How do you convince some guy to add $50 or $100 a month to his bills?"

Pat Cadam, owner of Pat's Garage on Perry Street in San Francisco, which services only Hondas and Acuras, said his Web site has been a useful marketing tool to distinguish his garage from others.

"A Web page has rounded out the personality of my (shop)," said Cadam, who set up his Web site through via Sirius about a year ago.

His site,, has tips on what certain car noises mean as well as an appointments page that allows his clients to e-mail him rather than call.

"I'm pretty specialized," said Cadam, who started computerizing his operation about five years ago. "Honda and Acura people seem to be very savvy about the Internet."

Cadam conceded, however, that not every small business needs its own Web site or high-speed Internet connections.

"I think there's a limit," he said. "You have to know your own business well enough to know what (Internet services) will do for you. If you're expecting a direct dollar amount coming back to you because of having a Web page, you won't get it. Someone in Florence, Italy, could look at my home page but not avail themselves of my services."

Some consumer advocates fear that ISPs focusing on attracting potential business customers may leave their dial-up consumer clients in the lurch.

"It's not good news for consumers," said Audrie Krause, executive director of San Francisco-based NetAction, a high-tech watchdog group. "The service is already unreliable. I don't know anyone who gives their ISP a full-fledged endorsement."

Other ISP watchers don't think the marketing shift toward business customers will result in poorer service to consumers.

Robert Luhn, editor in chief of Computer Currents, a Berkeley-based magazine that focuses on the ISP industry, said if consumers aren't satisfied with their ISP, they can easily switch providers since there are so many to choose from.

Although there are no figures on the number of ISPs based in the region or the number of Internet users here, Luhn said the Bay Area has the highest concentration of subscribers because it is the technology capitol of the world.

However, Luhn is concerned that ISPs might start charging consumers for services that are now free in order to improve their profit margins. "On the software side, (companies) charge," he said. "I suspect ISPs may follow that lead as time goes by."

Copyright ©1998 San Francisco Examiner, all rights reserved.

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