Access Providers Help Small Firms Navigate the Net : Businesses Fill the Gap on the Info Highway

Luke Hwang’s office, with its jumble of computer cables, racks of modems and faded “Star Trek” posters adorning the walls, looks more like the den of a teen-age computer geek than the headquarters of a fast-growing technology company.

And Hwang looks the part, sprawled on a chair in the back corner and sporting attire that might best be described as sub-casual.

But 2-year-old Kaiwan Corp. and its rumpled founder are making a name for themselves among the many small businesses now clambering onto the information highway. Kaiwan is one of a handful of Southland companies that have sprung up to provide direct access to the Internet computer network. And though competition is stiff and the market is changing fast, business is booming.

“I’m a technical person, so I want everybody to have as much access as possible,” said Hwang, who runs the company with his wife, Rachel. “I was looking for more access myself, and then I thought that everybody else would want what I wanted.”

It does seem that just about everybody--or at least everybody with an interest in business or computers--wants access to the Internet these days. The global network of networks links millions of computers and enables people to exchange mail, post messages on electronic bulletin boards and retrieve information from faraway archives and databases.

But an individual with only a personal computer cannot tie into the Internet directly, and for years access largely was limited to those with ties to research universities, large corporations or government agencies that could afford complex hardware.

The independent Internet access providers fill the gap.

Recently, the large commercial on-line services, such as Prodigy and America Online, have begun offering Internet connections too, and that could pose a threat to some of the small companies. But Hwang and others say there is still a niche, occupied by small businesses and professionals willing to pay higher fees--starting at about $40 a month--for speedier Internet connections and the specialized services offered by these small firms.

In addition to Kaiwan, the local providers include Earthlink Network Inc. in Los Angeles, Network Intensive in Irvine, Delta Internet Services in Anaheim, Speedgate Communications Inc. in Laguna Hills, Lightside Inc. in Covina, Realm Internet Systems in Newport Beach, Digital Popcorn in Pasadena, Caprica Telecomputing in Monterey Park and Cinenet in Santa Monica. All are privately held and generally decline to discuss their finances, but most have about 1,000 subscribers.

The role model for the start-ups is 7-year-old Netcom On-line Communication Services Inc. in San Jose, a veritable codger in this youthful field. The company now has about 85,000 subscribers and went public in December, raising $22 million.

Battling the Netcoms of the world--not to mention Prodigy and America Online, which boast well more than a million subscribers each--might seem quixotic. The small companies traditionally have competed by offering more local telephone numbers and higher-speed access to the Internet--advantages that are disappearing quickly as the larger companies add services.

But Neal Barry, who helped launch Delta Internet Services a year ago, said price competition has not been as intense as he expected.

The Internet is growing so fast, Barry said, that there is room for everyone at the moment. And the small companies can offer personalized service--hand holding, in his words--to make newcomers comfortable.

“Our ratio of new subscribers is about 75% people who are absolutely new to the Internet . . . but they know there’s a lot they don’t know,” he said.

A year ago, Barry left a position as vice president at General Automation Inc., a computer system design company in Anaheim, to start Delta with two partners. General Automation had done its own study about the feasibility of such a service, Barry said, and when the company decided against the project, he and engineer Michael O’Connor set out on their own.

“It was the kind of thing that looked like it was waiting to be done,” Barry said. “Nobody had ever gone after the whole Southland area, starting big as opposed to starting small.” The company now has 14 employees, and Barry said he hopes to keep expanding, particularly in the Inland Empire.

Clearly, however, the small players will have to scramble as the business evolves. Alliances between local providers and larger companies are also possible as the industry begins to resemble the small commuter airlines that ferry passengers to larger hubs, said Michael Shames, executive director of Utility Consumer Action Network, a San Diego-based consumer advocacy group.

“No matter how big the (larger) services get, I don’t see the local access providers going away,” Shames said. “You have all this content going up (on the Internet), and the question becomes: Who’s going to help the user navigate through it?”

Network Intensive, for one, is steering about 1,000 subscribers through The Net. About 400 of those are commercial accounts, opened by businesses curious about the Internet’s potential for spreading advertising and business information, said Michelle Bilder, the company’s marketing manager.

One way the firm sets itself apart from competitors is by offering subscribers a free “home page” on the World Wide Web, a graphics-driven segment of the Internet that many believe will be the catalyst for commercial growth.

One of Network Intensive’s customers, PC maker Advanced Logic Research Inc. in Irvine, receives 30 inquiries a day to its home page even though it has not yet advertised the site, said Larry Altneu, a senior design engineer for ALR.

“People are starting to expect that if you’re in hardware or software that you’ll have an (Internet) address at least, and probably more,” Altneu said.

Getting into the business of providing Internet access may not take huge amounts of capital, but staying in business means generating at least enough revenue to pay the staggering phone bills.

At Earthlink, that tab runs to tens of thousands of dollars a month, President Sky Dayton said.

Dayton, 23, is acutely aware of the rapid shifts in the market. The challenge, he said, is to gain a market share before larger companies complete their own Net links.

Dayton became interested in computers by following in the footsteps of his grandfather, an IBM research fellow. His interest in on-line communications dates to a coffeehouse he owned before starting Earthlink.

“I was always interested in the coffeehouse culture,” he said. “I see the Net culture as the same thing: setting up a place people could go and communicate without getting intoxicated.”

Introducing computer users to that culture will help Earthlink guard its niche, he hopes.

“The market for this is going to keep on growing. We’re not dealing with competition from other companies; we’re dealing with market ignorance,” Dayton said. “People have heard of The Net, but it’s this big cloud that we have to teach people about. “

Kaiwan’s Hwang, an immigrant from Taiwan, said he isn’t worried about the business challenges.

After earning a master’s degree in computer science at USC and holding a series of programming jobs, Hwang launched the company--which he said is profitable--with $100,000 loaned by family members. Rachel Hwang handles the company’s finances, and a staff of two manages customer accounts.

“I run this company as a hobby, for fun,” he said. “I wouldn’t mind closing it down if it wasn’t running well.”