Should You Be Benchmarking?

As recently as fifteen years ago, I was often asked by many of my clients to help them benchmark their ISP against their peers. By this, they wanted to know if they had the right number of employees for their customer base, if their revenues and expenses were in line with other similar ISPs, if they had too much expense from overheads, etc.

I always tried to help them, and I would gather statistics from other ISPs and share it with everybody who contributed information. But after a while, I found something that didn’t surprise me but which surprised most of my clients. It turns out that ISPs were not particularly comparable. They seemed to differ in most of the statistics that my clients wanted to understand. Interestingly, a lot of the folks with significantly different metrics considered themselves to be successful.

I started to dig into these differences, and that’s when I realized that, at least for relatively small ISPs, that benchmarking and comparing metrics between peers had little relevance to overall success. What I found on deeper examination was something I already knew but could now prove – that every ISP is unique.

Some of the reasons that ISPs differed in metrics was due to the way they purposefully operated.

  • ISPs differed significantly in their commitment to fix customer problems. Some of my clients didn’t react to customer outages after hours and on weekends, while some had a philosophy of not going home for the day until customer issues were resolved.
  • Some clients purposefully kept functions in-house rather than outsource for a lower cost due to a commitment to keep jobs for long-time employees.
  • Some ISPs set rates as low as possible to benefit the public, while others strove to maximize profits.
  • Some of my clients used software to automate processes as much as possible, while others kept the same methods in place that had worked for decades.
  • Some clients spent extra money to have pension plans and top-notch health insurance for employees while others were less generous.
  • Some of my clients were fully leveraged with debt to take advantage of growth opportunities, while others took pride in being debt free.
  • Some clients served highly rural areas where a truck toll to visit any customer was a huge time-eater.

These kinds of differences make it nearly impossible to make a side-by-side comparison of two ISPs, even ones with the same number of customers.

There was a time when rural independent telephone companies shared so many common characteristics that it was possible to gather benchmarking data that they found useful. But once these companies started to build networks outside of the regulated core areas, the companies changed. Growth outside the company meant competing without subsidies and only tackling growth that looked both manageable and profitable.

Today there is such a wide variety of ISPs that it’s even more difficult to compare them. Is it even possible to compare an ISP associated with an independent telco, one started by an electric coop, one created by a municipality, and one that is an overbuilder not associated with any other business?

This is not to say that mall ISPs don’t have a lot to learn from each other – but benchmarking is probably the least useful approach to understanding the business. ISPs all benefit from comparing technical solutions, software systems, marketing techniques, and how they market against large competitors. But none of that is benchmarking and just means small ISPs benefit from sharing information with similar peers.