A recent post on my blog has some good news. While it is true that there is a lot of talk about the big ISPs in the U.S. wanting to take down the net neutrality rules that were put in place from the FCC, the reality is that the “new” prices are still very much in direct conflict with the FCC rule.
It’s always easier to point a finger at the wrong person when there are multiple parties. It happens all the time, although at times in our industry it seems to be a pretty large majority that want to have the rules put back in place. Regardless of the ISPs’ motives, we all know that they have to abide by the rules.
In the end, the net neutrality rules are a joke. The fact is, the broadband providers are more than happy to make money from you and me. They will want you to pay more for the same service. They also want to be able to charge everyone the same amount of money, regardless of how much traffic they get. The only thing that stops them from doing this is the FCC rules in place allowing them to charge more on certain content providers.
A few years ago I worked for an ISP. To make matters even worse, the rate at which this particular company was growing was far worse than the overall trend in ISP growth. I remember working for a company that was growing at a steady rate of 0.8% per year. To make matters even worse, the company I worked for was not growing at the same rate. We were doing great at the beginning of the year, and then the year went on and on and on.
By the time the year ended we had seen a net loss of 10% in total revenue for the year, and our net loss after taxes was in the neighborhood of $100,000. The company was only growing by 1% at the time, and it was only making a profit of about $200,000 per year. The company was only paying 1.5 million per year in taxes, and we were only making a profit of about $2 million per year.
In an environment where the business broadband market is in the red, it’s difficult to see the long-term future of the company. A net loss of 10 in the middle of the year is hard to fathom. But a net loss of 100,000 from the year before, and a net loss of 100,000 after getting a tax break is even more difficult to fathom.
It turns out megapath isn’t as bad as we thought. The company now has a higher profit margin and a lower tax bill, and the business broadband market is growing. The bad news is that the broadband market is shrinking, it’s not growing, and its going to keep shrinking. Megapath is now a losing proposition. It is only profitable in a few specific markets (primarily the US) where it can charge high prices for the service that it delivers.
A business broadband connection can be a good investment. Just as the broadband market is growing, it should be expected that the service will grow as well. Megapath can offer a better service than you currently have on. You will not be able to keep pace if you arent willing to pay for it.
But that’s because megapath is so expensive relative to current broadband options. The big broadband players are using technology that isn’t that new. The companies that are still in business are using technology that hasn’t been around for quite a while.
Gigapath is a little different than that. Its a very old technology. It was developed in the 70s and 80s, and the first big broadband providers started rolling out their service in the early 90s. So it was around when the market was really taking off.