Let's make a deal, EarthLink sweeps up accounts from smaller ISPs

A new strategy from EarthLink Network is helping the Internet service provider create economies of scale for its own dial-up access business by taking consumer dial-up accounts off the hands of smaller ISPs.

Under its ISP customer acquisition program, EarthLink will pay participating ISPs a "cash bounty" for every account that it receives, as well as a sum for passing on any new dial-up business. Once customers are transferred, EarthLink will provide them with its TotalAccess Internet access software and forward their e-mail to the EarthLink network to ensure that the transition is seamless.

If the account is located in an area where EarthLink does not yet provide service, a point of presence will be set up in collaboration with UUNet and PSINet, EarthLink's backbone providers.

The point of the program is to provide smaller ISPs with a way to make money from often unprofitable residential customers while giving EarthLink a way to achieve customer growth, said an EarthLink spokeswoman.

"Without economies of scale, an ISP doesn't have access to critical capital to keep on growing," she said.

Traditionally, ISPs have increased their customer bases by either acquiring new customers on the open market or buying other ISPs, she added. With its customer acquisition program, EarthLink has created a third alternative that essentially makes other ISPs marketing partners.

And for those ISPs, the EarthLink program offers a way to shed itself of unprofitable accounts so they can spend more time pursuing more lucrative commercial accounts.

"Some of the smaller ISPs want to get out of the consumer business because they can't make any money on a $19.95 monthly flat rate," said Chris Mines, senior analyst at Forrester Research. "In the business market, they can charge more like $50 a month for unlimited access or sell multiple dial-up lines or dedicated access" for a higher monthly fee.

Web hosting, development and consulting are also profitable businesses for small ISPs, the EarthLink spokeswoman said.

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