A promising business industry that might never be on Guam

by Jason SalasMonday, October 29, 2001

An inside look at Web hosting - what has the potential to be a very lucrative business venture, and further the island’s quest for e-business...if we can get it right

Orville Redenbacher once said, “Do one thing, and do it better than anyone else.” And the dude made popcorn.

One of the most lucrative types of business that Guam entrepreneurs could easily get into won’t be so easy, at least in the short-term, and that’s a shame. A Web developer I had a meeting with once asked me why KUAM.COM is hosted off-island, and not with a local company (KUAM.COM sits on a Web server out of Los Angeles). She inquired why we did not opt to go with a local business to stimulate the economy and encourage growth. While I empathized with her, I said simply that my biggest responsibility was KUAM’s best business interests, and not trying to be the savior of the Guam economy. That’s for government to deal with. And at the time, no local provider was able to match the lengthy list of requirements I had sent, for the cost we were looking to spend. We were looking for a solution to empower us to adequately serve our users in the fashion that we envisioned.

The bottom line is that it’s not about sacrificing the quality of service just to choose a local company; it’s wise business sense to pick partners who will deliver the best overall service. And at the time that just wasn’t anyone locally....and this still remains true today, two years later.  Which can be a lifetime in the Internet Age.

Web hosting – the service by which a company provides the physical capacity, network bandwidth, and site management services in a great variety of areas, is something that I’ve been saying is the area of e-business that has the greatest potential to be a really profitable business venture on island and expand the possibilities for local commerce. The problem? Cost, expandability, and a lack of competition would likely run a few daring firms willing to take the plunge out of business in a very short period of time. And this is unfortunate, because we’ve got some really talented people doing some very impressive and revolutionary work...which now goes to the benefit of the national market.

The limited features of companies offering Web hosting services locally can be directly correlated to the slow growth of the Web-based commerce industry on Guam. We need to ramp up the game as a whole, if we’re going to try to make this thing work.

How this all came about
Governor Carl Gutierrez’s vision for Guam’s future in technology, under the advisement of Telecomm Consultant Bob Kelly, is for our island to mature into a regional telecommunications hub. Former senator Alberto Lamorena had a plan that would bring about a public-private partnership to advance Guam’s knowledge of e-commerce systems and applications, which could then be applied in organizational environments as cost-beneficial business solutions. While I tend to favor the latter theory as one which will be more achievable within the next two years’ time, I agree that both are integral components of giving businesses out here the ability to compete at a higher level than they are now, and take full advantage of advanced technology. This also makes venturing from the small business perspective more enticing for daring entrepreneurs, which has much broader effects on commerce in the round.

All of the major Internet service providers on island – Kuentos/MCV, Talaya, InternetPCI, and GuamCell – all do their best to be full-service ISPs, which is a noble task, but with the affluence of what you can do on the Internet and with numerous vendors popping up each year, is a hard challenge. It’s very difficult to do a great number of things well with limited resources (both human and technical), and very often an ISP will either do one thing really great, neglecting its other business interests. And with each ISP being a relatively small operation, it’s hard to manage so many things at the same time, each of which being quite the complicated task, requiring skilled, experienced professionals, with in many cases carries high overhead demands.

I should know – I did it for three years. And having my hand in so many cookie jars at the same time nearly drove me crazy.

What advanced Web hosting makes possible is a framework for intelligent business solutions. This ranges from the simple marketing-oriented Web page, to an advanced LAN-to-LAN e-commerce solution, or corporate intranet app. This is the basic palette upon which a developer can craft his masterpiece, and the platform upon which companies base their competitive online strategy. Guam is ripe for these type of mission-critical business apps, but the companies providing the services need to step-up their own offerings if the industry is to be advanced to the point of realization of government’s expectation for the island to emerge as a center of online commerce.

What needs to be overcome – roadblocks to success
The first and most important issue is bandwidth. One of the reasons Web hosting companies in the States can afford to offer so much for relatively so little is a matter of the cost input requisite to have massive telecomm links running their datacenters. Because we’re so far out here in the Western Pacific, organizations needing adequate capacity to transfer massive amounts of data need to pay exorbitant costs to lease space on underseas cable. Thus, the only companies which can afford to do this locally are IT&E, WorldCom, and Verizon, getting their pipe from AT&T, WorldCom International, and GTE Internetworking, respectively.

And so they pay monthly recurring charges for their own pipe, apply their own markup, and pass this cost along to you and I when we bandwidth from them. The space adequate for a semi-highly trafficked Web site should be at least of T-1 speed (1.544Mbps), which in many cases can be several thousands of dollars per month...way too much for small business owners to worry about. In comparison, the same line in California would only be a couple hundred dollars per month.

This is compounded by local ISPs and the way they manage their traffic. Again drawing on the fact that they strive to be full-service providers, the bandwidth they make available for Web hosting consumers very often shares the very same pipe they use to support their Internet access user bases. Thus, the size of their network capacity must be huge, given the fact that each supports several thousand users, with both dial-up/ISDN and broadband online accessibility. Companies need to recover their initial cost inputs and generate ROI to sustain their network bandwidth levels. This cost is ultimately imposed on you, but unnecessarily so.

Companies like WorldCom and Verizon offer managed hosting solutions as part of larger business packages, but cater mainly to larger enterprise-level operations, which rules out the ability of smaller firms to effectively setup shop. What little incremental bandwidth small business owners could likely afford (being increments of 256Kbps and less) is insufficient to run a competitive Web presence. If too many people log onto their site at the same time, this significantly degrades performance and leads to lost opportunity. Tycom promises great things in terms of managed enterprise business services, but I’m concerned about the scalability to make such technology applicable to the small business environment. We need to encourage support for the SOHO (small office/home office) setup, as well as the enterprise.

Next is the issue of the physical amount of Webspace needed to host a major Web application. Current hosting providers provide only nominal space, such as 20MB or less, for around $20/month, with limited features such as little-to-no scripting, a lack of vendor-shipped “black box” components, and no transactioning support for sending different types of data over the Internet, in a variety of formats. Database support and multimedia services are not normally accompanied in the package, and the client is normally bound to a single platform, Windows or UNIX. Additionally, local companies mandate that you call them first when major changes need to be made, which limits you to making the changes during their hours of operation.

For about the same rate with many stateside companies, you could get several hundred megabytes with advanced features such as domain name registration, e-mail addresses, scripting support, data store access, and all with Web-based control panels so you don’t have to get a tech on the phone every time you want to make a change. And it goes without saying that this is a problem in itself.

Network management is also a concern. At the moment, consumers are very limited in their ability to co-locate a server (the process of a Web host provider installing a computer belonging to the client on their network and having the client administer it remotely by way of VPN or RAS, acting as if the machine was local to his remote LAN), or have truly managed hosting. The big push on Guam is shared hosting (the concept of having as many as several hundred sites all served from the same Web server), which isn’t itself such a bad deal, it just lacks the degree of flexibility and control one has their Web apps. More choice would be nice.

Lastly, support is always going to be an issue of critical importance. If you’re going to turn the online realm into a profitable business venture, you had better manage your site accordingly. The obvious difference between brick-and-mortar businesses and online ventures is the fact that sites are never closed, don’t take lunches...and in the case of public sites, are theoretically open to 80,000,000 customers at any given moment. Thus, you need to be up and running all the time. Downtime is inevitable for any host provider, but minimizing this as much as possible with adequate network redundancy (having systems in place assuring functional rollover in the event that a main server fails) is a must. It’s taking a traditional engineering approach for an organizational management information system and applying it to the Web.

Kuentos has outstanding Web hosting Web hosting services (arguably the best on island), but it is limited to UNIX-based applications relevant to its Web servers that run Apache. Guamcell currently has a hybrid hosting network (Windows 2000 and Linux), but has miniscule features available on either platform. Talaya is years behind in its hosting solution, and just recently migrated from Internet Information Server on WindowsNT 4 to Linux-based hosting with Apache. Customers who may want to use combinations of platforms such as PHP, .NET, ColdFusion, and ASP, and features such as media streaming, custom components, remote access, usable IP address blocks, access to server logfiles for traffic analysis reports, and e-commerce features might not be able to find the precise tools and components they need to run their apps.

But with the current economic state of Guam – what can you do? It’s not cost-effective to offer first-class, value-added services, each of which demanding in resources, for only a handful of clients. Companies that do this kind of thing for mission-critical business apps stake their claim on providing quality hosting and concentrating on that. They minimize their total overhead demands by focusing on the bandwidth needed to get their hosting clients out to the rest of world, and not be inundated with additional traffic concerns.

The solution
The most obvious recommendation would be a vast reduction in the cost of bandwidth and network capacity. This will be achievable either through current ISPs massively reducing their prices or dramatically increasing their package offerings, to include more features, more Webspace, etc.; or the introduction of a new and major provider. If a new company were to setup shop which could offer low-cost hosting with vast services and support to local organizations, concentrating on hosting only, this might be a positive first-step.

And having been on the inside I can honestly tell you that it’s a heck of a lot easier for me to sit here and write about what changes should be made, as opposed to actually implementing them on a large Internetwork and develop pricing competitive to the States. What would be great is if the datacenter concept could be developed perhaps to the point of setting up a major port for businesses to run their online operations out of.  But while a pleasent option for advanced data service, this is reaching towards what realistically could occur.  It’s a tough call, either way. Trust me – speaking as someone who used to develop pricing schemes that shaped the Internet service provider market locally – the latter will almost definitely have to happen, because the companies involved in the former won’t (and likely can't) budge.

Such advanced Web hosting solutions could be easily provided by small businesses, even 1-to-2 man operations. I do such thing in limited capacity now from my home LAN  for clients I consult. But bandwidth remains is the main issue, and I can host hundreds of sites, but doing so at a snail’s pace in terms of performance. And this would be an unwise choice for businesses looking to compete on the cutting edge. With the pricing scheme being what it is, I’m limited in what I can do, and what I can offer.

If someone can get the business model right and implement it well, they can make a lot of money serving up and supporting dynamic, advanced Web-based business applications. Clients availing of these services can further expand their organization’s ability to communicate, share timely information and compete at high levels. This will put us more on track with what goes on in the States.

But sadly, as are so many things in business in general, and then further specifically in Guam’s case, this is much easier said than done.

And that’s a real shame.

The limited features of companies offering Web hosting services locally can be directly correlated to the slow growth of the Web-based commerce industry on Guam. We need to ramp up the game as a whole, if we’re going to try to make this thing work.
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