Up until now, our dial-up Internet service had only been available to people in Atlanta. Granted, it was a lot of people, but having a nationwide audience would be better. Think about it, if we could get 100 customers in just Atlanta, could we get 100 in every state? 5,000 customers would be a good boost to our sales, and put us on track for doing over $1,000,000 in sales per year!
We knew that creating our own nationwide, dial-up network was out of the question. The cost of placing modems, phone lines, servers, and Internet connections in every major area code was well beyond anything we could seriously consider. We had to find another way.
After doing some research we were able to locate several options for “renting” space on someone else’s modem network. I’d love to be able to say that we picked the right partner the first time, and lived happily ever after. In reality, it was the third partner we tried that we ended up using until we terminated our dialup service several years later.
Expanding our coverage taught me two important lessons:
1. Unlimited does not always mean unlimited. If you take the time to read your Internet service’s user agreement you will likely find there is some sort of cap on how much you can actually use the service. In the dial-up days this was usually the number of hours you could be connected. In our case, “unlimited” meant 300 hours per month. In today’s age of broadband this is usually the amount of information you can download each month. (For instance, my Comcast Internet service is capped at 300GB per month.)
While these caps may sound like a bit of a bait-and-switch, these policies typically only affect a very small portion of the customers. In our case, I can only remember one account that regularly used more than 300 hours. In that case, we gave them a second account, at no cost, even though our user agreement didn’t require us to.
2. The real money is made from the users that pay for the service and never use it. We rented our modems using a per user pricing model. This meant that if a user connected to the service, even if for only one minute, we had to pay for them as if they had used all 300 of their allowed hours. We loved users that didn’t use the service in a given month. This meant we got to pocket all of the $19.95 we charged them, and we did not have to share it with the dial-up network provider.
This business model can be seen all over the place. Your gym membership is a perfect example. The member that comes to the gym every day is not really the owner’s favorite customer. Rather, it is the member that rarely, if ever, shows up. An empty gym with lots of paying members is the perfect scenario for a gym owner.
Now that our service was nationwide we had to compete feature-for-feature with the larger, better funded services. This created another set of issues for us to tackle, but more on that in a future post.