A recent BT-sponsored report by Durlacher confirmed what many in they, but business is still being won. Is regulation needed to stop them, or are users just stupid to fall for their tricks? industry already know - naive IT managers are being fleeced by ISPs which are making them pay for their ignorance of the internet. Sheepish UK IT managers confessed to being saddled with ISP contracts that charge them up to 28 times too much for internet access.
Nick Gibson, the report's author, is stunned by the levels of price discrepancy between some of the deals. 'Some leased line customers were paying three times more than they should for basic 64Kb lines and up to five times more for 2Mb lines,' he says. One IT manager even admits to paying z120 for a basic modem connection worth about z10. Gibson blames an ignorance of internet technology as the main reason some ISPs were getting away with these charges.
'We pitched our survey at internet gurus in more than 300 top internet-using companies. What became clear however, was that most firms do not have internet gurus. Decisions that should be made by someone who knows about the Net were being left to people who know nothing,' Gibson says.
This leaves companies open to high-pressure sales pitches from ISPs, and contracts requiring technical wizards to work out that the services will cost big money.
One user, Safeway's Jeremy Wyman, calls such high-pressure sales techniques by ISPs the 'nineties equivalent of double glazing salesmen. I get at least three calls a week from ISPs trying to sell me one service or another.
Fortunately, I can say to them that we only deal with IBM or suppliers we know and trust,' he says.
Trying such techniques on larger companies is a sign of the inexperience of ISPs, according to consultant Sharon Saw of Saw IT. 'The larger ISPs would have the sense to realise they are not going to sell a service to an organisation like Safeway on a cold call. In fact, most of the ISPs that try it are small organisations hoping for that big deal that will set them up for life.'
But the fact that some organisations are buying equipment under such circumstances shows that some of the cold calling is succeeding, she added.
Saw believes this often occurs in departments within big organisations where discretion on small expenses like modems and a simple dial-up connection is delegated to junior managers.
Another way of fleecing users is the 'fly by night' operation. This appears one day and sets up a customer base, which crashes overnight having creamed off all the cash and leaving a lot of debts. They then set up again under a different name and approach the same customer base.
Some of the targets for unscrupulous ISP sales departments have been the medium-size businesses whose desire to set up an internet presence or to get Web access is compounded by the ignorance of what is involved.
James Gardiner, marketing manager of Demon Internet - one of the leading ISPs - claims he knew of another ISP selling its customers a 2Mb leased line which the contract's fine print revealed was shared with a telco's other users.
'The arrangement is dependent on the telco not being busy.
Probably when the company starts the contract with the ISP it is going to get a 2Mb service. But it is going to find that as more users share the line, its connection speed is going to drop dramatically,' Gardiner says.
He believes such 'small print' wheezes are one of the reasons Demon picks up defections from other ISPs, who instantly report faster download times - even though the new line was technically the same speed as their old one. Gardiner admits 'there are always going to be cowboys in the internet industry', but denies there needs to be any more bodies established to round them up. 'There are already enough organisations, such as trading standards, which can adequately police this. I don't think we need any more,' he says.
However, the Internet Service Providers Association (ISPA), of which Demon is not a member, was formed as a way of providing some form of industry self-regulation. Anna McMorrin, a representative at the ISPA, explains that the organisation was formed two years ago to protect the industry from the activities of pirate ISPs.
'It is so easy for people to set up as an ISP, that it is possible for cowboys who have no knowledge of the industry to establish themselves, usually based on their marketing prowess,' she says.
Fortunately, they find it hard to succeed as it is only really the big ISPs that make any money from it. 'However, the pirates can cause the industry problems and there does need to be some internal regulation.'
ISPA members have to agree to a code of conduct. If they break the code and a member of the public complains, the ISP can be thrown out of the association. While this may seem as morally significant as being thrown out of the scouts when you are seven, in a market where ISPs need their membership of ISPA as proof that they are reliable and honest, such an expulsion could hurt, McMorrin claims. 'We have ISPs advertising their ISPA membership on their Website. It is something they will miss,' she says.
So far, ISPA has 90 of the 140 or so ISPs as members and can boast a fair amount of power over its membership. The only problem is that the cowboy ISPs are unlikely to join, or would fail to meet the criteria.
But McMorrin suggests that not all ISPs were cowboys simply because they were charging seemingly inflated prices.
Some of the discrepancies between ISP pricing could be because of bizarre charging structures foisted on them by telcos, she adds. Such charges can see ISPs paying large costs to cross international boundaries, even though the actual distance is only a few miles.
Gardiner points out that often an apparent price discrepancy could be due to the amount of service that an ISP could provide.
Generally, you should expect to pay z10 a month for a dial-up connection or about z600 a month for a 64Kb leased line. However, Demon provides a dial-up connection for small and medium businesses, which includes facilities such as domain name registration and administration of a commercial Web server for which it charges z60 a month.
The industry is curiously guarded when it comes to identifying the pirates, mostly because they do not want to be accused of overtly attacking rivals.
Certainly, the size of the organisation is no guarantee that an ISP is a pirate. Some ISPs are very small.
Discovery, based in Coventry, is run by two people and it effectively markets itself with advertisements in the local papers.
Systems manager Chris Taylor says it is possible for local companies to work in a niche market against strong competition from larger ISPs.
'We are the only one that is based in Coventry. We don't go after the home user, and since we can't provide a 24-hour help desk, the larger users aren't interested either. Instead, we provide dial-up connections for small businesses,' he comments.
But the local connection means Discovery does not have to be aggressive.
People buy the product for the same reason they shop at a corner store.
'Bigger ISPs like UUNet do not need to use such underhand practises to secure their customer base either,' UUNet's UK channel manager Martin Temple says.
While he can see the sense of cold calling customers for single dial-up accounts, UUNet would never try it. 'We rely on the dealer channel to sell our service and almost let them run the sales for us,' he comments.
As a result, there is no need for underhand contracts or hard-sell techniques.
Temple cannot see the point of hard-selling into medium to large organisations with contracts a used car salesman would be proud of. 'You might as well be open and honest,' Temple says. 'Otherwise the customers will close their accounts.'
He dismisses the need for more industry regulation and believes the rogue ISPs will slowly disappear as the internet business becomes more mature.
Temple also suggests that users engage their brains when selecting an ISP. 'Basically, users need to start asking the same questions of their ISPs that they would ask an organisation putting cable to a building or a Lan connection. They need to enquire about aspects such as the speed and the quality of support. If they do, then they will be able to choose ISPs that can provide them with the sort of service they want.'
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