PeoplePC Helping ELN Stay Afloat

EarthLink has decided to get lean and ride the Dial-Up horse until that pony dies by the roadside. ELN wanted to buy AOL, but like Microsoft-Yahoo, no deal got done. ELN has tried many projects to move beyond the dial-up ISP business, but been met with frustration at every turn (DSLR agrees):

• on Helio as an MVNO;
• at Muni Wi-Fi;
• on BPL (broadband over powerlines);
• being squeezed by the access to sharing duopoly broadband pipes;

All of these were access plays that did not pan out. Plans to become the network operator for a nationwide network that they controlled did not come to fruition. If you are in the access game - say, reselling ILEC DSL - what is your next move?

According to its 4Q08 filing, ELN did well:

• Income from continuing operations of $27.3 million, up $5M from 2007
• Net income of $27.2 million
• Adjusted EBITDA of $72.4 million
• Free cash flow of $70.1 million
• Revenue of $216M in 4Q
• $955.6M for the full year 2008 - 21% down from 2007.

Here's where the cost savings were:

"Total sales and marketing, operations, customer support, and general and administrative expenses for the fourth quarter and full year 2008, were $71.0 million and $328.9 million, respectively. This represents a decrease of 40 percent versus the prior year quarter, and a decrease of 49 percent versus the full year 2007 comparable expenses."

ELN then went on to launch a marketing promotion under its PeoplePC brand of dial-up: " 'Connect for Less' Economy Internet Package Includes Full Customer Support for $7.95 per Month; Each 795th Sign-Up Receives The Service Free for 1 Year" or "PEOPLEPC LAUNCHES '25 CENTS A DAY' INTERNET ACCESS". What's the reason for the promo? The Economy. But ELN gives some good reasons for dial-up access, issues that Intelliwave's Director Marketing and I had discussed just last month.

"Staying connected to the Internet is very important, especially during these uncertain and challenging economic times. For a limited time, EarthLink will offer consumers a new, low-cost Internet access option," said Kevin Brand, EarthLink's senior vice president of product management. "Whether your job has been impacted and you need to search for employment or you surf the Web for bargains on household necessities, Internet dial access, with our Smart Dialer technology, continues to be an effective and inexpensive tool." [TMCnet]

PeoplePC's customers under this promo will have access to all 12,000 dial-up numbers; will have Symantec-powered email / spam for just 2 email addresses; and Free Internet Call Waiting.

I would milk Hosting, Email, Dial-Up, and DSL for as long as possible, but I would have a Plan B - funded by Plan A. First, cut costs. By that, I mean, OUT-SOURCE! You outsource your network - are those your DSLAM's or PRI's? Outsource your email and hosting. Realize that Sales & Marketing will be Vital. Hire the talent if you don't have it in-house.