Although the first ISPs aren't even 10 years old yet, you probably barely remember the days before dial-up and physical connections to data on the Internet. Today, ISPs offer broadband services beyond traditional dial-up, with DSL as the primary choice. DSL works well for both residential and small-office/remote-office connections.

But the ISP market has hit some hard times lately with problems in DSL deployment and residential customers being lured by large companies like AOL Time Warner and Microsoft. Companies with cable-modem offerings, like AT&T, are drawing customers away too. There is not much room for smaller, local providers, because it's tougher for them to differentiate their offerings from larger competitors.

In the past year, the DSL market shook out several large providers, including Rhythms NetConnections and Northpoint Communications. Others, like Covad Communications Co., are struggling to get solid footing. Enterprise customers shouldn't let this deter them from replacing older frame relay or private-line services to remote offices with DSL connections. But make sure you proceed with caution.

If you seek a provider that owns the DSL equipment and network, look for one that has a good source of income, preferably coming from something other than just DSL. If the provider resells or accesses someone else's network, make sure the network owner meets the previous requirement.

Internet providers have seen growth in additional bandwidth and services over the past two to three years, but 2002 will bring a slowdown as bandwidth needs level off. Although more companies are doing business over the Internet instead of face to face, fewer employees need that bandwidth. ISPs offering services beyond Internet access might see growth. In particular, Web hosting will increase by 39 percent each year through 2005, according to Probe Research.

Some new entrants into the ISP market space offer Ethernet connections directly to the enterprise wiring closet. Cogent Communications, Telseon, Yipes Communications and others are delivering fast network and Internet access over Ethernet connections. These services are aimed at the metro customer that needs interoffice connectivity for campus locations. The services also can be expanded to provide high-speed Internet and interstate office access.

These Ethernet services let enterprise customers change their bandwidth in a matter of hours instead of days, often from browser interfaces. While the price for these services tends to be much greater than that of frame relay or private lines, the increased bandwidth makes the extra cost worthwhile.

ASPs Specialize to Survive

Application service providers have had a rocky year, and the immediate future doesn't look much better for them.

Hosting companies are consolidating, so in the coming months we expect to see fewer players in this game aside from the big names we've come to expect: Ariba, BellSouth Corp., IBM Global Services and Verizon are among them.

Specialization is the name of the game, and soon customers will choose ASP and hosting companies based on whom they know and partner with. In addition, ASPs will need to provide Web monitoring and SLA (service-level agreement) enforcement.

Customers also will be seeking well-defined business-process and change-management methodologies. As more companies turn to ASPs for content-management services, both methodologies will become crucial. They let customers maintain control over content and determine culpability when content is not updated as specified by the contract.