Free Encyclopedia of Ecommerce » Free Encyclopedia of Ecommerce » Internet Service Provider (ISP) - History And Development, Proliferation And Consolidation, Major Providers For Consumers And Businesses, Competition Between Large And Small Providers

Internet Service Provider (ISP) - History And Development

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Prior to ISPs, access to the Internet required an account at a university or government agency and a working knowledge of Unix. The Internet began accepting commercial traffic in the early 1990s, but commercial users had to honor the peering protocol of swapping data free of charge. The National Science Foundation commissioned four private companies in 1994 to build public Internet access points, and in 1995 the federal government closed its own Internet backbone. Those four public access points—located in Washington, D.C., San Francisco, New Jersey, and Chicago—came under the control of WorldCom, Pacific Bell, Sprint, and Ameritech. As Internet traffic increased, those public access points became clogged, and the major telecommunications companies began building their own faster, private access points and building out the Internet backbone. For a while the larger backbone providers established peering agreements with smaller ISPs, whereby they would swap Internet traffic for free. In 1997 UUNET, Sprint, and AT&T stopped peering with smaller ISPs and required them to pay fees to gain access to their networks.

At the beginning of 1995 there were approximately 160 commercial Internet access providers in the United States. According to PC Magazine, average monthly fees were about $17.50, with connect time billed at $3 per hour. Some ISPs could only be reached through a long-distance telephone call. ISPs offered Internet access through three basic types of accounts. Shell or terminal-emulation accounts connected the user to a Unix system with either a command-line interface or a proprietary GUI (graphical user interface). SLIP or PPP dial-up accounts used a modem to make a temporary direct Internet connection and required TCP/IP software. Permanent direct connections for LANs over leased lines were provided primarily for business customers. At the time America Online, CompuServe, and other online services offered limited Internet access. IBM and Microsoft were in the process of building Internet software into new versions of Windows and OS/2.

During 1995 the ISP market became more competitive. The dominant ISPs in 1995 were UUNET Technologies (annual revenue of $94 million), Netcom Online Communications Services ($52 million), and PSINet ($39 million). UUNET was focused on business and corporate customers, while Netcom pioneered flat-rate pricing for the consumer market. In addition to these national and international ISPs, the ISP market included large interexchange carriers, such as AT&T and MCI Communications Corp., and regional ISPs, which numbered in the thousands and were growing daily by mid-1996. Netcom began providing Internet service in 1995 and had 400,000 subscribers after one year in business. AT&T also entered the ISP market in 1995 and claimed it signed up 200,000 subscribers in the first few weeks. Both AT&T and MCI offered unlimited Internet access to consumers for a flat rate of $20 per month, while Netcom charged a flat fee of $20 for 400 hours per month. Sprint Corp. followed with a plan similar to its long-distance competitors, AT&T and MCI. UUNET, on the other hand, charged businesses an average of $1,000 a month for Internet service. Consumers were more interested in low-cost access, while reliability and speed were priorities for corporate customers.

At this stage the Internet was growing rapidly, and ISPs were challenged to build out their infrastructure, improve their router technology, and increase their access points. By 1996 regional Bell operating companies (RBOCs) and long-distance carriers were forming new subsidiaries to provide Internet service. After AT&T rolled out its WorldNet service in 1995, the RBOCs saw Internet service as a way to leverage their large networks. Pacific Bell, through its newly formed subsidiary Pacific Bell Internet, began offering Internet access in April 1996 to 75 percent of its residential customers in the San Francisco Bay area, Los Angeles, Sacramento, and San Diego, as well as dedicated frame relay access for businesses. Bell Atlantic's Internet Solutions began offering dedicated Internet service to businesses and flat-rate dial-up services to residential users in mid-1996.

Internet Service Provider (ISP) - Proliferation And Consolidation [next]

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over 2 years ago

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about 3 years ago

The information is interesting, but where are your citations, and referencing. Its good and well you ask users to site your site, but we also need to know where you got the information from.

Without citations it makes your information un-creditably!!!