The rest of the world can wrestle over whether it settles on dial-up, DSL, wireless, or satellite; EarthLink remains “infrastructure agnostic,” as its chairman and CEO Charles “Garry” Betty puts it. Whatever the pipeline used, EarthLink’s objective remains the same: to provide a cost-effective communications “transport” to its members. “What we try to do is provide unencumbered access to the things members want,” says Betty simply.
The Atlanta-based Internet service provider now ranks as the second largest ISP, behind AOL. It leapt to that position rather suddenly through its $3.2 million merger with former rival MindSpring Enterprises, completed this year, and its even more recent acquisition of OneMain.com in June.
EarthLink ended last year with 3.1 million subscribers and expects that number to climb to around 5 million by year-end. While that may seem like small potatoes compared to AOL’s 23 million subscribers, the No. 2 player has consistently gained market share in North America. Back in 1995, a combined EarthLink and MindSpring probably had 1 percent of the ISP market for North America. At the end of this year it will have nearly 20 percent.
Another anticipated first for 2000: EarthLink expects to pass $1 billion in revenue. And the company finds itself in the fortunate position of having $1 billion in cash in the bank, so at this point in time it doesn’t have to worry about a “burn through” rate or even having to raise capital in the near future.
So now that it’s far from its fledgling beginnings, EarthLink can afford to concentrate on where Internet access seems to be headed-and that’s clearly well beyond dial-up access. Two years ago EarthLink began delivering broadband services when it created a relationship with a cable company and nine other managed service organizations. But it wasn’t an easy turn of strategy. As Betty recalls, “we diligently tried to get cable companies to allow us to provide Internet service over their networks, but they refused.” In the end, EarthLink began collaborating with the independent telcos to provide a DSL solution. “We expect to hit 150,000 broadband accounts and that’s up from 25,000 at the end of last year,” he says. “Those numbers will explode throughout 2001.”
Judging from EarthLink’s deflated stock prices-it traded recently at around 16-and those of other ISPs, at least compared to Internet infrastructure companies such as Cisco or Juniper Networks, one might surmise that the future of the Web is elsewhere. Not surprisingly, Betty staunchly disagrees. “ISPs are the enabling technologies that provide the connectivity portion of the Internet and are largely responsible for helping the user accomplish things on the Internet,” he says. “If we are successful, we play an integral role in helping people use the resources of the Net.”
To this end, EarthLink continues to focus its effort in this part of the e-commerce world. In January, the company signed a comprehensive distribution relationship with Apple Computers, through which EarthLink will continue to be the default ISP on all Apple computers. And Apple, for its part, invested $200 million in EarthLink.
Hardware companies are not the only IT or communications firms forming distribution and investment connections with EarthLink. Sprint has owned 28 percent of the company since 1998. Of course, with all the deal-making EarthLink has done of late, Sprint’s percentage has declined some, but it so values its stake that in May it invested $431 million more, putting its ownership percentage back to where it was two years ago.
The importance of an ISP is sometimes hard to figure as the Internet revolution progresses, but it occupies a very important connectivity niche. “[People] can’t buy one book on Amazon, they can’t consume any content on Yahoo, they can’t do an auction of Ebay, they can’t go to iOwn and get a mortgage, and they can’t go to Webvan and buy groceries unless they have an ISP,” says Betty. “We are that piece of the infrastructure that enables all of that to take place.”
That’s why ISPs must adapt toall delivery mechanisms-or risk becoming some sort of high-tech dinosaur. “There’s a lot of interesting stuff happening from a technology perspective,” says Betty. “In addition to an emerging fixed wireless standard, over the next two years there will be two additional high-speed technologies that will be very applicable for our customer base: satellite and something called HDR, or high-speed data rate.”
According to Betty, over the next three to five years, 33 percent to 40 percent of EarthLink’s member base will migrate to one of a variety of high-speed alternatives to traditional dial-up Internet access. The convergence at this end of the technology pool will involve Internet deliverance. For example, cell phones will be adding Web capability.
“That is not going to replace how people use a PC to connect over the Internet, but will augment the way people receive and process information. In the coming years there will be a host of devices that will use the Internet in very innovative ways.”