Industry analysis - Interview

Part-timer for the people

Marie-José Klaver
(ISPworld, januari 2001)

XS4ALL led the way with providing consumer net access and chief executive Doke Pelleboer is determined to keep pushing at ISP boundaries.

'Have you seen our wired Christmas tree?,' asks Doke Pelleboer, chief executive of Dutch ISP XS4ALL.'You can switch the light on and off from the web.' Nerdy practical jokes like this are typical of the company, the first ISP in Holland to offer web access for consumers.

XS4ALL was founded in 1993 by members of what was, in effect, the country's computer underground - young ex-hackers wanting to provide internet access for all at low cost and generally experiment with technology. One of the founders, Rop Gonggrijp, had been editor in chief of the Dutch hacker magazine Hack-Tic, which published a host of tips and tricks to help users make free calls.

XS4ALL quickly proved itself a success. During its first three years of existence the company drove the formerly state-owned telco KPN Telecom crazy by ordering more and more phone lines for its growing number of customers.

Pelleboer arrived at XS4ALL in July 1999, as interim director, following the departure of chief executive Wilbert Stikkelbroeck. When employees approached him, requesting that he stay on in a permanent role, Pelleboer became XS4ALL's chief executive. 'He's well liked by everyone,' says public relations manager Sjoera Nas. 'It's a pleasure to work with him.'

IN AND OUT
Pelleboer is the first senior KPN figure to join XS4ALL, having worked as manager of internet telephony at the telecoms company. The founders sold the company to KPN Telecom in December 1998 for an undisclosed sum, although sources close to XS4ALL suggest the ex-hackers made between €25 and €50 million from the deal. The sale shocked many of the ISPs early customers. As a former state monopolist KPN was viewed by many as a bureaucratic enemy selling overpriced phone and data connectivity. Indeed, between 1993 and 1996, according to Nas, the two companies openly 'fought', suggesting a marriage would prove problematic to say the least.

Critics were afraid KPN would turn XS4ALL, known for its technical expertise, into a mediocre company. Or, maybe worse, would try to commercially exploit XS4ALL's independent and at times rebellious image.

But none of this has subsequently happened. XS4ALL, which now has 90,000 subscribers, is still one of the most respected ISP's in the Netherlands and is still engaged in political and social issues. Recently XS4ALL launched Netkwesties, an electronic magazine and discussion board about privacy and rights in the digital age. Netkwesties is made by an independent editorial team that is not afraid to criticise XS4ALL.

In August XS4ALL will participate in Hacking at Large (HAL2001), a three-day, open air networking event in the tradition of earlier hacker festivals, such as HEU '93, HIP '97 and CCC '99. The event, organized by Rop Gonggrijp, Jaco Lockhorst and Cor Bosman, all former shareholders of XS4ALL, promises to focus on computer security, privacy, citizen's rights, biotechnology and other controversial issues affecting wider society.

DECLARING INDEPENDENCE
'We operate independently from KPN,' explains Pelleboer. 'Of course we buy infrastructure from KPN, but we also do that from other Dutch telcos. 'XS4ALL still stands for a special way of using the internet. We think privacy and security are very important.' As a Christmas present all customers received a cd-rom with anti-virus software and the encryption program PGP (pretty good privacy).

'Being idealistic doesn't mean you can't be commercial as well. Of course you have to make the right decisions. One of the best decisions we've made was not to provide free access,' Pelleboer says. The ISP made the decision a year and a half ago not to move into the free access space, a decision it has stuck with while a plethora of others tried and largely failed to adopt the pricing strategy.

'We've discussed it thoroughly, but we firmly believe in the subscription model. Customers have to pay for access. Some of our competitors, like Planet Internet, have made their services much cheaper or even totally free - without results. They haven't attracted more customers and they've lost millions of guilders. Free access is not a valid business model.'

PAYING THE WAY
Pelleboer's conviction is that most free ISP's will disappear in the coming months. 'They don't have enough revenue,' he argues. 'In the end, paid-ISP's will profit from the free ISPs. Among them they have one million subscribers who will [eventually] be looking for a new ISP.'

XS4ALL is a financially healthy company, Pelleboer is keen to stress, highlighting the fact that the ISP has been profitable for the past seven years. In 1999 XS4ALL made a net profit of €1.6 million on a turnover of €15 million. Pelleboer compares an XS4ALL internet account, costing €15 a month, with the cost of a PC. 'The average price for a PC has been €1500 for years now. For that amount of money you get more value every year. Larger hard disks, faster CPU's, free software. We want to provide more and more value as well.' As an example of this, XS4ALL gives customers a four-month free subscription to the anonymity service, Freedom, and also offers free WAP access and free email aliases.

Pelleboer is convinced that XS4ALL's future lies in affordable broadband access. The introduction of ADSL (asymmetric digital subscriber lines) is, however, moving at a particularly slow pace. XS4ALL currently has about 7000 ADSL subscribers and hopes to have 32,000 by the end of 2001. Many customers, especially small business and heavy users, are waiting to switch to ADSL, costing between €50 and €85 a month. According to XS4ALL the main problem, somewhat ironically, is KPN Telecom, which at the moment is the only supplier of the technical infrastructure and is considered to be moving very slowly towards making telephone exchanges ready for broadband. Says Pelleboer: 'Customers order ADSL and sometimes have to wait for eight weeks until KPN has time to connect them. We are lagging behind due to their slowness.'

XS4ALL has recently solved major technical problems associated with the technology. Customers were so dissatisfied with the poor quality of their ADSL connections that XS4ALL felt obliged to return part of the subscription and connection fee. Pelleboer insists, though, that things are now under control and the main customer concerns have been addressed.

The company is also looking to provide cable access to broadband applications. High speed cable internet services are particularly popular in the Netherlands, which has the highest amount of cable connections per head in Europe. The formerly state-owned cable infrastructure has been privatised and is now dominated by a few multinationals, including UPC, @Home and Wanadoo, companies with no obligation to open up the infrastructure to other ISPs.

XS4ALL had to stop a cable test in Amstelveen when the city sold the cable to cable company Casema, a subsidiary of Wanadoo. 'We couldn't uphold our service level anymore because Casema had control over the technology,' complains Pelleboer. 'They didn't want to talk to us.' He regrets the fact that the cable experiment, which lasted over two years, had to come to an end. 'We've proven that multi-provider access at the cable infrastructure level is possible. We don't just want to provide access for all, but also as many access forms as possible. There are no good reasons why only a few companies can offer cable internet. We are willing to invest a lot of money in the network.'

XS4ALL has taken the fight to the new cable monopolies by lobbying politicians and members of the Parliament - and with some success. The Parliament decided in November 2000 to open up cable access to other providers as soon as possible. It determined that by 1 March 2001 the government must have taken measures to enable other ISPs to provide cable access to users. The government had originally argued for the status-quo to be preserved until 2002.

Gaining earlier access to cable isn't down to XS4ALL, however. Recent problems with UPC and other cable providers led to a surge in consumer and media criticism, compelling the government to open up the system sooner than originally planned.

SHIPSHAPE
Pelleboer has also had to resolve internal problems since assuming the helm of XS4ALL. 'It was quite a mess when I came here. I introduced a normal business structure with a management team and reduced the absenteeism.' He says that during his predecessor's period as chief executive the company experienced some months where 15% of employees were absent through illness.

He continues: 'I like independent, self-minded people. I'm quite plain myself, but I love to facilitate the informal and critical company culture that's so typical of XS4ALL. There are always a lot of discussions taking place on our internal mailing lists. The staff often have good ideas. They convinced us not to use our customer's email addresses for direct marketing purposes, not even when we wanted to tell them about new services.'

'We wanted to send an email to our customers to tell them about the Freedom offer,' he laughs. 'But only 10% of them had given permission to receive emails. In hindsight it would have been terribly wrong to send an unsolicited mailshot about anonymity and privacy software.'

Pelleboer is not as plain as he claims. The chief executive, who looks much younger than his 53 years, only works four days a week. Although working part-time is quite common in the Netherlands, managers - especially men - who work less than 40 hours a week, are still an exception. 'It's no problem here to work part-time,' he says. 'Everyone knows I'm off on Mondays and when I'm at home I always read my email and can always be reached by phone in emergencies. So when I start my working week on Tuesday there is no gap. I'm fully informed.'

(Verschenen in ISPworld, januari 2001)