I am not by any measure old, yet I remember when we had no internet and my nieces minds boggle at that, they think I must be ancient. How could you survive without internet they asked me, in their minds the concept of no internet is pretty much science fiction and the thought of not having internet access filled them with dread.
I was hooked on computers ever since “Oregon Trail” was first released, when the only real alternative to typing hundreds of lines of code was to load up a cassette tape which was pre-recorded with a series of beeps, whistles and when played back, told your computer what to do.
You see those beepy pre-recorded sounds were EXACTLY what the internet sounded like the first time I heard it. No that wasn't a typo, I heard the internet before I ever actually saw it, so much so that I still sort of believe that my cable internet is fake internet on the basis that it’s eerily silent all of the time.
No, I don't hear the internet because I am some sort of internet whisperer, we ALL heard the internet before we ever actually used it back then, it’s how we knew the internet was coming, its arrival heralded by a series of high pitched screeches and digital burbles that came to you from down the phone line.
The Internet Before ISPs
In the old days we didn’t really have internet service providers (ISPs), we just called each other up over the phone and had our computers burble and screech at each other, this was called a handshake and as crazy as it sounds, it was how you connected your computer to “the internet” back then. The early internet was very crude, it was mostly individual machines talking to each other over the phone lines at first. The phone companies did not even know this kind of early internet traffic was passing over their telephone networks at first, although they caught on pretty fast.
Before ISPs you had to have an account at a university or government agency to connect to the internet, but the internet began accepting commercial traffic in the early 1990s and there was an agreement with commercial internet users that they had to honor the peering protocol of swapping data free of charge. This meant that if they wanted their traffic to pass over other organizations’ “bits of the internet,” they had to accept other peoples’ traffic over their own bit of the internet, the basis of modern net neutrality.
An Early History of the ISP Industry
In 1994 the National Science Foundation took the internet into its own hands and commissioned four private companies to build public access points, strategically positioned in San Francisco, Washington DC, Chicago and New Jersey. These came under the direct control of WorldCom, Pacific Bell, Sprint and Ameritech, becoming America’s first ISPs.
As internet traffic increased over time, those public access points became congested with traffic and the major telcos around at the time began building out their own internet backbone, composed of faster private access points. Initially the larger and more dominant backbone providers honored the peering protocol and worked out peering agreements with smaller ISPs, meaning they would all exchange each other’s internet traffic for free.
In those early days of the ISP industry, there were hundreds of commercial internet service providers in the United States and at the time, according to PC Magazine, the average monthly connection fee for each account was roughly $17.50, with an additional charge of $3-4 an hour for the time that you were connected. Even back then this was quite expensive and connecting to the internet for long periods of time could quickly run up your phone bill.
There wasn’t much fun to be had on the internet back then, it was mostly still just geeks, business people, universities and the government using it, so for a lot of people it still didn’t make any sense to use the internet, especially as you still had to connect using a command line or a proprietary graphical user interface provided by the ISP. The internet browser along with HTML to build web pages had not quite been invented yet at this stage and IBM/Microsoft were still in the process of building internet technology into their operating systems and hardware.
1995: The Turning Point
Things rapidly progressed of course, and throughout 1995 the ISP market in the US heated up and quickly became very competitive. At that time the dominant ISPs were Netcom and UUNET, each with annual revenues of around $40-50 million to give you an idea of the market size back then. While Netcom was busy pioneering the world’s first flat rate internet pricing for the US consumer market, UUNET was busy signing up business and corporate customers. It wasn’t just these two of course who were beavering away building the early internet, you also had large interexchange carriers (telco providers) like AT&T and MCI as well as thousands of much smaller regional ISPs.
The early ISP market was very fragmented. It contained lots of different kinds go companies all innovating and developing the early internet in different ways to serve the different requirements of its users. Business and consumer internet users wanted two completely different things back then: consumers wanted low cost access above all else, they were sick of paying a small fortune every month to use the internet, but businesses were much more focused on reliability and speed.
The number of internet service providers increased from about 1,400 in early 1996 to around 3,000 ISPs in 1997, and by 1998 there were an estimated 4,500 ISPs in North America (USA & Canada). A lot of them were small mom and pop operations that served local consumers and small businesses in local markets. These guys survived back then by leasing and then reselling the internet services of much larger internet service providers. As the market began to consolidate towards the end of the ‘90s, these small operators began merging with telephone companies in order to stay in business and provide their customers with a single source for internet and phone connections.
As with any rapidly emerging industry, the multiple players and the fragmented market gradually begins to consolidate. The telephone companies and the internet backbone providers all began to merge and be acquired, with long distance telephone carrier Worldcom buying UUNET parent company MFS for $12 billion, creating the second largest internet backbone in the USA. Then the largest regional telephone provider in the US, GTE Corp (aka General Telephone & Electric Corporation) bought internet backbone provider BBN Corp for $616 million, a phenomenal sum of money in the late ‘90s for any acquisition that was dwarfed only by the Worldcom acquisition of UUNET.
The ISP Wars
As the noughties got into full swing, the ISP Wars began with fierce competition between large and small ISPs who were in turn being turned over by the internet backbone providers, the people who actually owned the infrastructure upon which the internet runs. Although nobody really owned the internet, the infrastructure that ran the internet was owned by a small group of very large corporations and control of the internet infrastructure gave them the power to tax smaller ISPs for access to networks and to charge them for operating the network access points where the ISPs traded traffic (packets) with each other.
The end result of the ISP wars in the noughties was less choice for consumers and business internet users, but even though the ISP market back then was dominated by larger players, consumers and businesses could still choose from an estimated 7,000 ISPs in 2002. There was still at this point plenty of market share to go around with consumers favoring smaller regional ISPs who were offering value added services like web design and e-commerce services in order to compete with larger ISPs who could guarantee wide reach and faster, more reliable internet access.
Today we would struggle to imagine a time when, depending on your region, you could choose from any one of potentially hundreds of ISPs. In 2017 the consumer broadband market is an effective duopoly in some parts of the country, controlled by the two of largest ISPs that own their own internet backbone, Comcast and AT&T. Consumer internet speeds are ridiculously low in some parts of the country because of this, despite their users paying some of the highest internet access fees in the country.
AT&T’s merger with Time Warner in 2016 only consolidated the already massive hold they had on the US internet market and was one of a string of deals that further placed control of the internet into fewer corporate hands. In 2015 Comcast had to abandon its $45 billion dollar bid for Time Warner after the FCC opposed the merger on the basis that it would create an ISP with “too much control” over what Americans do and watch online. In 2016 the FCC also approved the merger of Charter Communications with Time Warner to create the second largest broadband provider in the US with SEVENTY PERCENT control of the high speed internet market and just a short time later the FCC green lighted the AT&T and Time Warner merger for a whopping $85 billion dollars. Finally let’s not forget about Verizon buying AOL for $4 billion dollars and Verizon buying Vodafone’s chunk of Verizon Wireless for a whopping $130 billion to create the largest wireless internet provider in the US.
What Does This Mean For You?
In a nutshell it means higher prices and fewer choices for end users, as businesses and consumers struggle to negotiate better rates with ISPs who control huge swathes of the US internet market. This meant depending on where you are based in California alone, your internet bills could vary by as much as 50%, with two thirds of Los Angeles residents living in areas served by sometimes just one internet service provider. Weak competition yields high prices and places little pressure on ISPs to upgrade networks in order to offer faster internet and better service. In LA County for example, fiber based services (faster internet than DSL or cable) are available in less than a quarter of the census blocks, but in other countries like France for example, internet users have a choice of at least six providers with coverage approaching 100% for fast fiber optic internet connections.
If you are a business or consumer internet user trapped in one of these no competition areas, you are out of luck and are just expected to deal with it, at least until Google Fiber decides it wants to move to your city, which it probably isn’t just yet. You are effectively being held to ransom and forced to pay higher bills for lower quality internet service.
How Can We Help?
SACA is currently responsible for managing hundreds of internet circuits. We have connection partnerships with more than 200 different internet service providers, and direct carrier support on a technical and network level. After more than a decade spent providing internet to our customers spread across California and the US, we have internet experts internally who are deeply experienced at negotiating internet contracts with ISPs.
We make sure that we get the terms we want for our customers in writing following a merger or an acquisition. We make sure we know what the ISPs transition plan is and we get legal assurances the service level agreements of our customers will never dip in quality or delivery. We make sure we have technology refresh clauses, which means that larger accounts spending more than $100,000 a year in communications have the right to refresh contracts and renegotiate new terms. Finally we do not sign a communications contract for longer than two years, as right now the ISP market is too fluid for corporate buyers to sign up to long term agreements. All of this means our customers get the best possible prices.
SACA has unparalleled purchasing power and choice when it comes to providing our customers with the fastest, most reliable and most cost effective internet access. If you are worried that you might be spending too much on your internet bills, then just send us a copy of your bill for a free quotation today.
Looking for startup advice? Check out this blog from IronOrbit, How to Start a Business.
Welcome to my blog! I mainly like to write about the history of IT.