Business Models of Internet Service Providers: Netnomics May 2019

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Business models of Internet service providers
Article in Netnomics · May 2019

DOI: 10.1007/s11066-019-09130-7
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Netnomics
https://doi.org/10.1007/s11066-019-09130-7
Payam Hanafizadeh1 · Parastou Hatami1 · Erik Bohlin2
Accepted: 14 February 2019 /

© Springer Science+Business Media, LLC, part of Springer Nature 2019
Abstract
A business model can be perceived as a simple, yet focused, representation of the
related activities of a company, which describes how to create the value of the com-
pany in terms of information, products and services. Given the significance of the
Internet service infrastructure in new Internet-based business logic, notably the pos-
itive relationship between the growth of the Internet service infrastructure and GDP
growth, this paper elaborates on the business model of the Internet service providers
(ISPs). Accordingly, the ISPs’ business model, in the scope of connectivity service
providers, based on the selected meta model (Hedman and Kalling’s ontology) at the
industry level is analyzed. For validation and generalization assessment, the busi-
ness components of two ISPs at the instance level and the business components of
other service providers in the Telecom industry (beyond the scope of this research)
are compared, point by point, with the proposed business model components, respec-
tively. The results of this study will raise the awareness of ISPs’ executives and new
entrants of different aspects of this business. The proposed business model can be
considered as a basic model in the area of designing new business models, especially
in the area of new Internet-based technologies.
Keywords Internet service providers · Business model · Telecom industry ·

Environmental analysis · Iranian ISPs
Payam Hanafizadeh
hanafizadeh@gmail.com
Parastou Hatami
Hatamy.parastow1@gmail.com
Erik Bohlin
Erik.bohlin@chalmers.se
1 Allameh Tabataba’i University, Tehran, Iran

2 Chalmers University of Technology, Gothenburg, Sweden
Payam Hanafizadeh et al.
1 Introduction
These days the importance of Internet infrastructure is undeniable. The first reason
for the importance of Internet infrastructure is that the new business logics are formed
primarily in the E-environment, in particular the Internet. In other words, the increas-
ing growth of Internet users, the growth of the Internet penetration rate, has caused
businesses, service enterprises and their customers to benefit from Internet-based ser-
vices. Therefore, the need of these businesses to have an Internet infrastructure has
increased which consequently resulted in increased competition in providing Inter-
net infrastructure (access provision). But the main reason offered for conveying the
importance of Internet infrastructure is its role in the economic growth of countries,
particularly in the macroeconomic sector (GDP growth). According to the World
Bank, the broadband Internet exercises a significant impact not only on education,
health services, economic integration and globalization, but also on the economy in
a way that for each 10% increase in the penetration rate of the broadband network, in
developed and developing countries, there will be a rise by1.38 and 1.21%, respec-
tively, in GDP [101]. Similarly, the effect of broadband Internet on the growth of
economic activities can be expressed in terms of three different items: a growth of
1 to 1.4% in employment rate, a growth of 0.5 to 1.2% in increased business and a
growth of 0.3 to 0.6% in innovative IT1 (information technology) businesses [69].
Other studies also highlight the direct relationship between access to the broadband
Internet and corporate productivity [45] as well as the positive relationship between
the growth of the Internet penetration rate and GDP growth [65]. In some research
studies, not only access to the Internet has been proposed as a driver for the economic
growth but also its effect on GDP growth has been substantiated to be greater than
that of agriculture and energy industries [80]. The evidence provided here induces
the importance of getting access to Internet infrastructure in the economic growth of
countries (GDP growth).
On the other hand, based on previous research, providing access to Internet infras-
tructure is considered as the core and traditional business of ISPs [41, 66, 72]. On
this premise, parallel to the increase in the significance of the Internet infrastructure,
attractiveness and importance of ISPs business also rises.
ISPs can be considered members of the large family of Service Providers (SPs).
Based on the definition by Techopedia (2018), service providers in a general way
can be regarded as the providers of IT solution types to all IT-based businesses.
These services are provided to customers in different types including on-demand,
pay-per-use and hybrid delivery method (www.Techopedia.com/definition/2510/
InternetServiceProvider-ISP). Members of the SPs family include Telecommuni-
cations Service Providers (TSPs), Application Service Providers (ASPs), Storage
Service Providers (SSPs) and ISPs. Therefore, it could be expected that the ISPs
inherit the general characteristics of SPs.
Although access provision can be considered as traditional and core business of
ISPs [66], over time, due to developments in technology along with the changes
1 Information Technology
in customer needs, offering new services has become crucial for the ISP business.
Hence, current ISPs can be categorized based on different viewpoints including types
of customers, types of business (providing network, information or data services) or
their position in the Internet Value Chain [25].
The scope of this research, based on the Internet Value Chain reported by
GSMA 2016 (www.GSMA.com/2016/05/The-internet-Value-Chain), is limited to
fixed access (wired and wireless) in the connectivity section of Fig. 1. Therefore,
mobile wireless access is not within the scope of this study; such services are
typically associated with mobile operators (see Fig. 1).
Of course, some ISPs have also applied for a license for mobile connection, but
from them only a limited number have succeeded in obtaining such a license due to
the high cost and regulatory limitations associated with obtaining it. Meanwhile, ISPs
that succeeded in obtaining a mobile operating license (e.g. Telefonica and Verizon)
have initiated this new activity in the form of a new company, Strategic Business Unit
(SBU) or a different business line, which has a different technology infrastructure,
business processes, customer segmentation, value proposition and therefore different
business models. It is worth mentioning that such companies have to address Fixed
Mobile Convergence (FMC) initiatives [10] now. Hence, the most common com-
munication technologies for ISPs (in wired and fixed wireless connections) are the
Content Rights Online Services Enabling Services Connectivity User Interface
E- Retail (B2B) Design and Hosting

e.g. Amazon, E- Travel Design & Development +
Groupon e.g. Uber, Expedia Web Hosting
Premium Rights
Video Hardware
Music Devices
Publishing Payment Platform e.g.
Video Music e.g. Visa, PayPal Smart phones
Gaming e.g. Youtube Pandora Mobile Access PCs
Non e.g. China Mobile, Smart TVs
entertainment Verizon Wireless,
Set top boxes
Content Publishing Gaming Telefonica, Vodafone
e.g. FT, e.g. Gambling M2M platforms Digital Media
Amazon king, e.g. SIM management & M2M Tablets
BBC, Bloomberg,
Tencent Betfair Platforms + Application & Consoles
Disney, Time Warner
Solutions e.g. Bosch Other Items
Cable
e.g. Apple, Lenovo,

Sony, Samsung
Social and
Community Advertising
e.g. Facebook, Online Agencies + Online
Yahoo
Communication
e.g. Cisco, Skype Networks & exchanges +
Third Party & Servers
e.g. WPP
Made for Digital Fixed Access

Professional (including VPNs
Systems and
content Search e.g. Google, Yandex Internet Analytics & Wi-Fi)
e.g. Adobe e.g. Orange
Software
User
Business, Telecom Operating
Generated
Information and Malaysia, AT&T System
Content Managed Bandwidth &
Reference APP Stores
Cloud Services Content Delivery
e.g. Google maps, Security and
Buzz feed, Full Core Network &
Wikipedia e.g. Microsoft Software
Screen, Maker, Interchange + Content
Azure Delivery Networks +
Xmedia DS
Content Optimization e.g. Apple, Cisco,
e.g. BT Google, Microsoft,
Satellite Symantec
e.g. EutelSat, SES
Other E- services e.g. Nest
Fig. 1 Internet Value Chain (www.GSMA.com/2016/05/The-internet-Value-Chain) M2M: Machine-to-

Machine, VPN: Virtual Private Network
Table 1 ISPs’ business lines in the telecom industry [6]
1. Connectivity service providers 2. Information service providers
Access service providers Content providers

Backbone service providers Application service providers
Data center providers Communication service providers
End user network providers Internet retailer providers
Market place providers
digital subscriber line (DSL), Wimax1 and LTE2, respectively [109]; wireless fidelity
(Wi-Fi) technology is also considered as complementary to these technologies [46].
It should be mentioned that there are two other classifications for ISPs. The first
one is based on Altman’s (2000) study [6]. He has proposed a classification for
ISPs in the form of two general classes and nine subclasses (see Table 1). Based
on Altman’s classification, the scope of this research is limited to Connectivity Ser-
vice Providers that entail two subclasses of Access Service Providers and Backbone
Service Providers.
The second classification was proposed by the European Commission in
2016 (https://ec.europa.eu/digital-single-market/en/actors-broadband-value-chain).
According to this classification, the roles of all broadband businesses in the tele-
com industry (including ISPs) can be classified into three main roles (see Table 2).
Based on this classification, the scope of this study is limited to the role of Network
Providers for ISPs. In this research, we will also consider the ownership of Physical
Communication Lines for ISPs. Hence, the role of Physical Infrastructure Providers
can also be added to the scope of this study.
Therefore, based on the Internet Value Chain (see Fig. 1) and two classifications
which have been proposed by Altman (see Table 1) and the European Commission
(see Table 2), the remaining ISPs in the industry (beyond the scope of this study) can
Table 2 Three main broadband business roles (https://ec.europa.eu/digital-single-market/en/actors-broadband-

value-chain)
1. Physical infrastructure 2. Network provider (NP) 3. Service provider (SP)

provider (PIP)
Backbone PIP: owns and oper- The network provider leases The service provider sells Inter-
ates the passive infrastructure dark fiber from the PIP to offer net services to the end users over
in the backbone service provider connectivity a network provider’s connectivity
to the end users network
Access area PIP: owns and
operates the first-mile con-
nections
be categorized in two major groups including Cloud Service Providers (Data Cen-
ter Providers, Application Providers and Platform Providers) and Content Providers
(Information & Reference, Video, Music and Entertainment Content Providers).
Accordingly, this research focuses on the description of business models of ISPs.
Business models in all businesses in general and in the ISP business in particular, can
be viewed as one of the interfaces between business strategy and business processes
[31, 89]. Also, it can be considered as a bridge between external requirements and
internal capabilities in the business [107]. In this research, business models of ISPs
within the defined scope are elaborated.
An investigation in the area of ISP business within the defined scope indicates that
research conducted in this scope (despite its importance) is limited and scattered. In
other words, in this scope, there is no report on a holistic business model of ISPs and
merely, the extant studies have described certain components of the ISPs business
models. For instance, Mazzoni et al. [84] focused exclusively on the segmentation of
ISP customers and found out that the proper segmentation is built on the consumption
pattern of similar services. In 2007, Markendahl and Makitalo [81] focused on ISP
customer relationship management and broke down this type of relationship into two
sets of short-term service-based relationships and long-term trust-based relationships.
Further, Bouckaert et al. [15] investigated the various types of competition in the ISP
industry and envisaged this competition in the form of three types of inter-platform,
facility-based intra-platform, and service-oriented intra-platform. Robert and Carman
[105] also focused merely on the need to create a portal to expedite and facilitate the
access of customers to the network. What’s more, Camponovo and Pigneur [18] dealt
with more aspects of ISP business than others did. In their view, ISP customers can be
grouped into three categories, including end customers, network operators and other
ISPs. They also believed that the revenue stream of ISPs can encompass users’ sub-
scription and traffic agreements with other ISPs. They summarized the key activities
of ISPs into four categories: network promotion, contract management, service pro-
vision, and infrastructure operations. Finally, in their opinion, content and application
providers can be considered as key partners of ISPs. In the case of key processes of
ISPs, nothing particular was found and only Kelly [57] introduced key processes of
all communication and information service providers that could be extended to ISPs
business as well. In describing the cost structure component of ISP business models,
no specific results have been reported. This was predictable based on the opinion of
Khajeh-Hosseini et al. [58] that expressed the dependence of cost structure on how
the key resources are used in any business. Due to the fact that in the literature key
resources components have not been reported, it is logical that cost structure compo-
nents cannot be described, based on secondary data, as well. It should be mentioned
that in the keyword search, significant articles were found on cost models [21, 102]
and cost structure beyond the scope of this study. For instance, Altman and Kaeshef
[8] have dealt with the significant factors in cost structure of ISPs in the domain of
cloud computing (IaaS3 Providers). Salame [108] has discussed this issue in general
not considering the type of industry. Srinagesh [112] has focused on the structure of
cost for all Internet-related businesses. Fukuda et al. [38] have worked on identifying
the effective factors on the cost structure of all ISPs. Ghezzi [41] has studied the cost
structure of ISPs in the future.
The review of research within the defined scope reveals that three components of
ISP business models including key resources, cost structure and value configuration
have not yet been elaborated by the researchers. Moreover, a holistic ISP business
model has not been described in any study. This is while different studies have been
conducted in the areas of ISP Value Network, ISP Value Creation, ISP Ecosystem,
ISP Reference Model and ISP Business Model beyond the Scope of this study, for
instance [7, 9, 13, 14, 29, 35, 40, 47–49, 55, 56, 76, 77, 87, 97, 115] could be
mentioned.
Lacking a holistic ISP business model within the scope of this study means value
structure of the ISP business in this scope is vague and this hinders the creation of
new, innovative, and sustainable business models [87]. This is why proposing a holis-
tic ISP business model prepares the ground for predicting and better understanding
opportunities based on new Internet-based technologies and forms a foundation for
designing business models for other ISPs in the industry. Based on this background,
the research question for this study is formed as follows.
What is the business model of ISPs at telecom industry level like?
Hence, the scientific contribution of this research is supposed to be as follows:
1. Description of the components of ISP business models that have been reported
in the conducted research within the defined scope (connectivity service provi-
sion), secondary data, and are applicable in elaborating on ISP business model
components in this scope.
2. Elaborating on three components of ISP business models including key
resources, value configuration and cost structure that have not been reported in
the literature. It should be noted that these three components have been intro-
duced in the literature of other ISPs in the industry (Cloud Service Providers and
Content Providers). Hence, inspired by the literature of other ISPs in the indus-
try and using the results of the interview with the experts in the fields of IT and
CT2 (communication technology), these three components are elaborated in the
scope.
3. Last, but not least, providing a holistic ISP business model, based on a meta
model.
Describing a holistic ISP business model is significant for the following reasons;
• This model can be used as a framework for designing ISP business models in
the industry. In other words, by changing certain components of the ISP business
model, one can design different business models based on the value proposition.
Furthermore, this model can be used as a framework for predicting and bet-
ter understanding opportunities based on new Internet-based technologies such
as IoT (Internet of things) and Big Data, so that creating new services based
on these technologies, new revenue streams, new business lines and ultimately
new business models and new value chains [9] can be modeled through the ISP
2 Communication Technology
business model. In other words, in order to take advantage of opportunities

related to the new technologies, ISPs can leverage such a model, update it3 and
incorporate the necessary changes and innovations into it and plan their future
business model.
• Elaborating a holistic ISP business model causes to clarify the value structure
which leads to the creation of new and sustainable business models [87]. In
addition, describing such a model results in a better understanding of market
requirements and making a compatibility between market needs and the value
structure.
• Such a model can be considered as a great help to ISP managers to identify
the position of their own business in the ISP market and change their classical
view toward the value chain [87]. It also facilitates better understanding of the
components of this business and the market potentials, too [87].
The outline of the remainder of this paper is as follows: in Section 2 the research
method for this study is elaborated. Section 3 (Literature Review and Data Gath-
ering) has three steps; in the first step (Section 3.1), the research undertaken in
ISP business within the defined scope is reviewed. In the second step (Section 3.2)
among the business model description ontologies, an ontology is selected as our
Fundamental Basic Theory. In the third step, (Section 3.3) the research undertaken
in business model components of other ISPs in the Telecom industry is reviewed.
Section 4 (Data Analysis) has two steps. In the first step (Section 4.1) the compo-
nents of ISP business models are described and illuminated based on the ontology,
and according to the secondary data. In the second step (Section 4.2) a holistic ISP
business model in the industry level is illuminated. Section 5 consists of validation
and generalization assessment of the proposed business model. Section 6 consists of
a discussion and Section 7 consists of the conclusion on the results, implications, and
an outlook.
2 Research methodology
This research aims at describing ISP business models within the defined scope (Con-
nectivity Service Provision). Based on this, the process of the research design for
conducting this research includes the following steps.
The first step covers literature review and data gathering in the ISP business domain
(see Section 3). This step encompasses three interrelated sections.
• The first section (Section 3.1) reviews the literature related to ISP business within
the defined scope. The results of this review are directly applied in selecting
the appropriate meta model (see Section 3.2) and describing the components of
ISP business models in Section 4 (see Section 4.1). Therefore, in order to boost
3 Due to the impact of an appropriate business model provision in success of a new technology [95].
the accuracy in extracting the secondary data from the reviewed studies in this
section, the content analysis method is used.
• In the second section (Section 3.2), based on the results of the first section,
among the different ontologies for describing a business model, one ontology
(meta model) is selected as the Fundamental Basic Theory.
• The third section (Section 3.3) focuses on reviewing the literature related to other
ISPs in the telecom industry (Cloud Service Providers & Content Providers) to
describe their business model components in the industry level, based on the
selected ontology in Section 3.2. The results of this section are directly applied
in the validity & generalization part of this research (see Section 5). It is obvi-
ous that a review on the literature of these two groups is as much as they are
related to the validation & generalization of the ISP business model in this
research.
Before elaborating on the procedure for selecting the research undertaken, it should
be noted that the analysis of the model and components of ISP business is an inter-
disciplinary study which encompasses management, business, and information and
telecommunication concepts. Hence, in order to review the research undertaken in
this area, Google Scholar and Scopus search engines were searched using the follow-
ing keywords in the title, abstract and keywords of the articles: business model, key
elements of business model, business model of telecom industry, ISP business model,
ISP value network, ISP value creation model, ISP reference model, importance of
ISPs, and future of ISPs. Therefore, articles were extracted via scientific databases
such as ProQuest, Science Direct, Emerald, Springer etc. The timeframe for choosing
the articles was designed between 1990 and 2017.
It is noteworthy to mention that the focus in selecting the research undertaken is
on the ISP business model (and its components) in the industry level, instance level,
and to some degree meta model level. The other areas are not attended to. Hence,
the amount of research examined in the ISP business within the defined scope of this
research amounted to 243 and the ones related to other ISPs in the industry (beyond
the scope of this study) were 103.
In order to select the relevant articles, in the next step filtering was performed
based on the following criteria:
• Articles in which the term “business model” was randomly used in the article
were not taken into account.
• Scholar journals were directly used and the results presented in conference
papers, technical reports and translated books were indirectly used. In other
words, conference papers, master’s theses, doctoral dissertations, textbooks and
unpublished working papers were excluded because academics and practition-
ers generally use journals to acquire information and disseminate new findings.
Therefore, journals represent the highest level of research [90].
• Articles whose main focus was on business models, value creation models, and
value networks in each of the three levels: metamodels, typology, and instance
levels were selected.
• The focus was on articles that sought to develop or describe a business model in
a particular industry.
Data bases 243+ 103 Based on 67 + 32

selected criteria Authors review
search Papers Papers
Fig. 2 Selection process
• The focus was on articles related to all ISPs in the telecom industry including
mobile operators, instead of focusing solely on the field of ISP business.
It is noteworthy that the decision to include non-peer reviewed papers was impor-
tant as it recognized the value of editorial and invited commentaries in shaping the
research within a discipline. According to Fig. 2, the result of the second-step fil-
tering was 67 articles that focused on the ISP business within the defined scope and
32 articles related to other ISPs in the telecom industry (Cloud Services Provider &
Content Providers).
The second step encompasses data analysis for elaborating ISP business models
within the defined scope (see Section 4). This step includes two subsections.
• In the first part (Section 4.1), ISP business model components according to Hed-
man and Kalling’s ontology, are described and illuminated, using the secondary
data extracted from the literature review.
• In the second part (Section 4.2), some interviews are conducted with experts
from IT and CT in order to illuminate the remaining components of ISP business
models and picture a holistic ISP business model within the defined scope at the
industry level.
The third step involves validation & generalization assessment of the proposed ISP
business model (see Section 5). This step includes two parts.
• In the first part (Section 5.1), ISP business model components at the instance
level, two case studies, are described and compared with the proposed business
model components peer to peer.
• In the second part (Section 5.2), the components of other ISPs on the indus-
try level (beyond the scope of this research) are compared with the proposed
business model components.
It should be mentioned that the two case studies that are supposed to be reviewed
in the first part of the validation assessment section are two Iranian ISPs. Before
elaborating on the procedure for selecting them, to establish the initial understand-
ing of the status of Iranian ISPs, the communication chain of this group of service
providers is described. So far, according to Fig. 3, Iranian ISPs have been depen-
dent on TCI4 for their first / last mile links and have been affiliated with the TIC5 to
provide their international and inter-provincial communications links. It is notewor-
thy that dependency on TCI is not appealing to ISPs because TCI is also considered
4 Telecommunication Company of Iran

5 Telecommunication Infrastructure Company
ISP1
ISP2
ISP3
Verizon Flag
Global Internet
TIC TCI
End Users
PWMC
ISP10
Flag ISP11
(Optical Fiber)
First mile/Last mile
ISP12
Fig. 3 Current communication chain of Iranian ISPs
as a competitor of Iranian ISPs in providing Internet services. However, after grant-

ing Fixed Communication Provider’s license (FCP license) to some ISPs, this group
of service providers becomes independent in providing their first / last mile links
required, and their dependency on TCI will end but they continue to be dependent on
TIC to provide international and inter-provincial links.
After establishing the initial recognition of the current status of Iranian ISPs,
in order to evaluate validation of the model at instance level (Section 5.1), from
among twelve Iranian ISPs, two ISPs which enjoy better reputation and rank-
ing, Shuttle and Pars online, were selected. Shuttle and Pars Online started their
activity in 2002 and 1999, respectively, after obtaining the ISP license. In 2003,
these two ISPs acquired the license of PAP6 (as pioneers in obtaining this license)
from the regulatory body and radio-communication organization. In the newest
rankings, based on the user’s average score, Shuttle and Pars Online have won rank-
ings two and three among twelve Iranian ISPs (www.Zoomit.ir/2015/11/21/26145/
adsl-operators-ranking). According to one of the experts’ opinion in the field, it is
difficult to point out which of these two ISPs is better than the other because the
choice of the best ISP is largely dependent on the facilities and customers’ needs.
In the next sections of this research, we focus on elaborating the research design
procedure steps.
3 Literature review and data gathering
The first step in the research design procedure focuses on reviewing the research
undertaken in the area of ISP business. To this end, initially the literature in the
scope of this research (Connectivity Service Provision) is reviewed. Next, based on
the obtained results, an appropriate meta model for describing ISP business models
among the existing ontologies is selected. At the final stage, the literature related
6 Private Access Provider

to other ISPs in the industry level is reviewed, as much as they are related to the
validation and generalization assessment of the proposed ISP business model.
3.1 Studies on the ISPs business
As it was mentioned in the introduction section, the literature of ISPs within the
scope of this study (despite the importance of this scope in the economic growth
of countries) is limited and scattered. Hence, in order to increase the accuracy in
extracting the secondary data, content analysis is used in this section. In other words,
for providing a logical segmentation of the research undertaken, content analysis with
an open coding method was conducted using Atlas Ti software in the following steps:
1. Studying the title, abstract and introduction of selected articles to determine the
main focus of each research. Accordingly, the selected papers were codified in
the three main domains: the types of business models, important elements in
determining the type of business model and ISPs business domain.
2. To determine the subfields of each domain, the entire text of the selected arti-
cles was studied and the coding was done based on the implications of the text.
Accordingly, after studying the different sections of each article, the core ISP
business domain was divided into five sub-domains: ISP business components,
ISP business opportunities, innovation in the ISP business model, ISP business
environment, and the economic role of the ISP business.
3. Since some articles were associated with more than one domain or sub-domain,
the relationship between domains and sub-domains, if any, should be elaborated
in this step.
The results of content analysis according to the steps presented above based on Atlas
Ti software, are briefly summarized in Table 3 and in detail in Appendix A. It is
noteworthy that in order to ensure the reliability and integrity of coding conducted
here, the articles were evaluated and coded separately by the authors and the codes
were compared with each other. In case there were inconsistencies in coding, the final
coding was carried out after creating consistency.
3.2 Fundamental basic theory
A business model can be analyzed at three distinctive levels, including the meta-
model (ontology) level, the industry level (typology), and the instance level (tailored
to the desired purpose) [93]. In this research, to describe an ISP business model,
at first we should seek for a meta model that is not only simple, appropriate and
perceivable, but is also able to communicate the complexities of an ISP business in
a common language. For this purpose, it is essential to determine from among the
existing available ontologies7 , which model is selected, why it is selected and what
the description depth of each of the components of the model is. It goes beyond doubt
that such issues are subjective and determined according to the expected purpose
of describing the model in question. Evidently, the description of a consultant, a
7 Types of business model domains (in the second row of Table 3).
Table 3 Domains of the previous research partnerships within the defined scope
Main class Subclass Papers
Types of business – Camponovo and Pigneur [18] Afuah, and Tucci [2]
models
Dholakia and Kshetri [30] Alt and Zimmermann [5]
Tan and Henten [117] Hedman and Kalling [51]
Osterwalder [92] Wirtz et al. [126]
Osterwalder et al. [93]
Important elements – Lee and Chan-Olmsted [68] Faber et al. [34]
in determining the
type of business model
ISP business domain Business Mazzoni et al. [84] Chiou [23]
components Markendahl and Gunasekaran and
Makitalo [81] Harmantzis [46]
Bouckaert et al. [15] Srinuan and Bohlin [113]
Bouncken et al. [16] Rolland [106]
Camponovo and DaSilva and Trkman [27]
Pigneur [18]
Raju et al. [104] Lin and Ding [73]
Kelly [57] Van Gorp et al. [121]
Ko et al. [63] Li and Liao [71]
McDougall [85] Coucheney et al. [26]
Ghezzi [41] Shrimali [110]
Osterwalder and
Pigneur [94]
business Mangal et.al [79] Ghezzi and Dramitinos [42]

opportunities
Liao et al. [72] Ghezzi et al. [43]
Thaichon et al. [120] Kim [60]
Prentice [100] Håkansson and Ford [50]
Kuo et al. [67] Zott and Amit [129]
innovation in Sorescu et al. [111] Stamison et al. [114]

a business model
Casadesus-Masanell Zhang and Hassanein
and Zhu [20] [128]
Casadesus-Masanell Jovarauskienė and
and Ricart [19] Pilinkienė [54]
Doerr and Kuipers [32]
Ghezzi et al. [44] Teece [118]
Odlyzko [91]
business Adi, 2015 [1]

environment
Rajasekar and Al Raee
[103]
Table 3 (continued)
Main Class Sub class Papers
economic role of Qiang et al. [101] Koutroumpis [65]

an ISP business
Lehr et al. [69] Manyika and Roxburgh [80]
Grimes et al. [45] Chu [24]
researcher, a senior manager, or an investor from a particular business model varies

from depth and breadth view, depending on the purpose of their study [51].
In research conducted on ISPs, there is no specific ontology followed for describ-
ing the business model. For instance, the KII8 project endeavored to identify the
factors influencing the development and growth of broadband Internet, which in
turn affects the business model of ISPs. Based on this study, the disparity in the
level of development and the Internet growth among countries was attributed to a
combination of environmental factors such as politics, customer demand, and sup-
porting related technologies [68]. In another study by Faber et al. [34] the factors
influencing the business model were found to be an amalgamation of internal fac-
tors including service design, organization design, technology design, and financial
design. In today’s competitive and changing world, attention to external factors and
environment is unquestionably as effective as the focus on internal factors in busi-
ness success. In one recent thought-provoking research, various types of business
ontology were ranked with considering the range of constituent elements which can
indicate the accuracy of describing and explaining the business. Among the proposed
business models, four models of Hedman and Kalling, Yip, Wirtz, and Osterwalder
and Pigneur possess the highest range of constituent elements, in which the compo-
nents of the business model are more precisely discussed [126]. In the present study,
from among the four models mentioned above, Hedman and Kalling’s model was
selected to describe an ISP business model in the Telecom industry because, first of
all, in this meta model, the proposed business value is not confined to an element or
part in the business model, but the entire configuration of the model represents the
value proposition. Second, the description of the value proposition is not restricted to
a basic theory, but various principal theories (RBT,9 ABT10 and VCT11 ) are recruited
in accordance with the corresponding components of the model. Third, in addition
to the internal factors, this model concentrates on environmental factors in the form
of competitors and Porter’s five forces. Finally, the seventh dimension of this model,
which is referred to as a managerial, organizational and longitudinal component,
constitutes the dynamics of the business model and embraces cognitive and cultural
constraints related to the perception of value by customers.
8 Korean Information Infrastructure

9 Resource Based Theory
10 Activity Based Theory
11 Value Configuration Theory
The results of the research undertaken within the defined scope, in line with
describing ISP business model components12 and based on Hedman and Kalling’s
ontology, can be presented according to Table 4.
3.3 Studies on other ISPs businesses
In this section, the literature on the business model components of Cloud Service
Providers and Content Providers are reviewed based on Hedman and Kalling’s ontol-
ogy. The results of the literature review in this area, which is presented in Table 5, are
used in a validation assessment section. Due to the inheritance property that exists
among different members of the SPs business model, it is expected to find congru-
ence among the proposed business model components and other ISPs components in
the validation assessment section.
4 Data analysis
This section focuses on analizing the data extracted from the literature review and
conducted interviews, in order to elaborate the ISP business model within the defined
scope. Hence, at first (in Section 4.1), ISP business model components are described
according to Hedman and Kalling’s ontology, using the secondary data which is
extracted from the literature review. Then (in Section 4.2), some interviews are con-
ducted with experts from IT & CT in order to illuminate the unknown components of
the ISP business model which have not yet been addressed in previous research and
picture a holistic ISP business model in the industry level.
4.1 Describing ISP business model components
Before elaborating ISP business model components based on Hedman and Kalling’s
ontology, it is advisable to introduce this meta-model in general. Hedman and Kalling
have considered the business model at four levels (market, offerings, activities, and
resources) and seven related components [51]. These components that initiate the
market level comprise customers, competitors, value proposition, key activities and
organization, key tangible and intangible resources, raw material suppliers, and the
seventh dimension [51]. It goes without saying that some of these seven components
are associated with the internal business environment, and others describe the exter-
nal environment of the business. The seventh dimension is the only component that is
simultaneously within the organization (under management component) and its envi-
ronment (under longitudinal component or time dimension) and covers the model’s
dynamics.
In this section, ISP business model components are described and illuminated
based on Hedman and Kalling’s ontology, using the data extracted from research
undertaken in ISP Business within the defined scope.
12 They are presented in the fourth row of Table 3.

Table 4 The previous research partnership in describing ISP business model components
Business Business Ecosystem Value Other

model model creation topics
components
Customer segment + channels • Camponovo and Pigneur [18] • Chiou [23]

• Ko et al. [63] • Mazzoni et al. [84]
• Markendahl and Makitalo [81] • McDougall [85]
Competitors • Bouckaert et al. [15]

• Bouncken et al. [16]
• Shrimali [110]
Five forces of Porter • Adi [1]

• Rajasekar and Al Raee [103]
Value proposition • Camponovo and Pigneur [18] Gunasekaran and Harmantzis [46]
Revenue stream • Camponovo and Pigneur [18] • Coucheney et al. [26]
• Osterwalder and Pigneur [94] • Srinuan and Bohlin [113]
Cost structure • Raju et al. [104]
• Ghezzi [41]
Activity + key processes • Camponovo and Pigneur [18] Kelly [57]
Value configuration Rolland [106]
Key resources Håkansson and Ford [50]
Key suppliers (key partners) • Camponovo and Pigneur [18]
Scope of management + • DaSilva and Trkman [27]
longitudinal dimension
4.1.1 First level: market level
At this level, the environmental factors composed of the Porter’s forces and the three
components of customers, competitors, and suppliers in ISP business are examined
as follows:
Porter’s forces Porter’s five-forces model is a logical tool for analyzing the effect
of each of the forces associated with the key business components of a variety of
industries [103], which is in ISP business (in the telecom industry) as Table 6.
Table 5 Components of other ISPs in the telecom Industry (beyond the scope of this study) BM: business
model
Components name BM components in cloud BM components in con-

providers tent providers
Value proposition Infrastructure service (storage & com- • Digital content like photographs,
puting) + platform as a service + appli- digital music, or digital video [99]
cation service (SaaS + On Demand
WS) [125]
• Digital content refers to infor-
mation and data stored in a digital
format including: pictures, movies,
videos, music, programs [86]
Customer segment B2B + B2C. B2B market is more B2B + B2C (in general is an entity
significant than B2C [127] that accesses a network application
hosting system) + may also be a
content-embedding entity [83]
Key resources • Accessing resources [122] • Network resources [98]
• Computation & storage • Communication resources +
resources [33] Computing and storage servers [75]
• Software license requirement [37]
Key partners • Application service suppliers + • Platform makers [74]
Network operators + Ad-agencies
+ Software suppliers + Hardware
suppliers [36]
• Infrastructure suppliers [124] • Content suppliers [62]
• Content registration, man-
agement, and reproduction [88]
• Content distributer [59]
Key Process • FABa [39] according to the eTOM • FAB [39] according to the eTOM
framework [22] framework [22]
• Security management processes [4] • Content delivery process on a
website + Content distribution pro-
cess + Caching related processes
+ Content personalization process
[96]
Table 5 (continued)
Components name BM components in cloud BM components in content

providers providers
Cost structure • Cloud storage cost for the data is • Infrastructure Costs + Cost of Managing
more than the data transfer cost and infrastructure + update cost + Accessing cost
computing cost [102] + Bandwidth cost + Reliability, Stability and
Security costs [96] Fixed costs related to
producing the information [61]
• Selection of cloud computing
services and cloud types [3, 11,
70]
• Evaluation and selection of
service provider [3, 11, 28, 64]
• Service charge [3, 11, 70] imple-
mentation, configuration, integra-
tion and migration [3, 28]
• Support [3, 28, 70]
• Initial and permanent training [3,
28, 64]
• Maintenance and modification
[64, 70, 116]
• System failure [28, 82]
Revenue stream • Subscription + Pay-per-use + • Advertising + Subscription + Pay-per-view
Dynamic Pricing [125]
• A move towards usage-based • Sales & Affiliate programs + Syndication +
licenses, penalties and pricing [12] Wireless (The willingness of consumers to pay
for wireless content) [123]
• The revenue depends on the bud-
get for improving QoSc + number
of customers + charge for the aver-
age usage of a service [40]
Value configuration can be value shop + value network can be value shop + value network
[106] [106]
a FAB: Fulfillment, Assurance and Billing

b FAB: Fulfillment, Assurance and Billing
c Quality of Service
Customers This section includes analyzing customer segmentation and customer

relationship management.
Customer segmentation can be considered as a process of segmenting a heteroge-
neous market into homogenous segments of customers that not only have comparable
characteristics but also offer similar responses to market activities [63]. In research
carried out so far, there has not been a specific pattern for segmentation of ISP cus-
tomers, but one of the most logical ideas is the segmentation based on the pattern of
consumption of the same services [84]. Accordingly, the estimate of profitability and
the development of strategies related to preserving customers will also be facilitated
Table 6 Analysis of Porter’s five forces in ISPs business
Forces Description
Threat of new entrants The gravity of the threat of new entrants relies on their impediments and
the reaction of existing competitors [1]. According to the ITU Telecom-
munication Regulation handbook (2011), the regulatory body plays a
major role as one of the key stakeholders in ISPs [119]. In other words,
if the process of offering new ISP licenses is facilitated and the entry
cost is lowered, this threat will be a serious threat to ISPs.
Bargaining power of suppliers The suppliers (of ISPs and other businesses) increase their bargain-
ing power based on their level of importance of supplying the required
resources [1]. It is obvious that bargaining ability of a supplier will
be reduced by reduction dependency to other internal and external
suppliers (especially in required infrastructure).
Bargaining power of customers Telecom customers who are divided into two groups of individuals and
companies are sensitive to the quality and price of services, and these
two factors influence their decision to purchase services from an oper-
ator [1]. According to the ITU, the bargaining power of customers in
developed countries is greater than that of developing countries [53].
The threat of substitute The analysis of the effect of a substitute product requires a comparison
products or services of the cost-performance of that product with that of a similar product in
the industry [103]. The focus of ISPs (in this research) is access provi-
sion. Therefore, 3rd, 4th and 5th generations of cellphones, especially
with the development of smartphones poses a great threat to them.
Competitive rivalry The intensity of competition is one of the main components in any
industry, which is based on the concentration rate (CR), and represents
the market share of an industry that is dedicated to the four largest
companies in the industry. Therefore, greater CR represents high con-
centration and lower CR represents the intense competition in industry
[1]. ISPs are always engaged in intense competition with other ISPs to
attract potential customers (due to providing intangible services)
[85]. In general, ISP clients can encompass three groups of end customers, network
operators, and other ISPs [18].
Customer relationship management (CRM) is essential for ISPs because of the
intense competition in the provision of Internet services and the intangibility of the
services. Customer relationship can be divided into two categories: short-term and
long-term. The short-term relationship is service-based, while long-term relationship
is trust-based [81]. The customer relationship method has contributed to the per-
ception of the value provided, which leads to increased customer satisfaction and
customer loyalty to an ISP [23].
Competitors The kinds of competition between ISPs can be broken down into four
broad categories: the first type, the inter-platform competition, is a constructive com-
petition that encourages newcomers to invest in the business. It is also a step forward
in escalating the broadband penetration rate. The second type, called facility-based
intra-platform competition, is considered to be a neutral competition and does not
exert any influence on increasing or decreasing the Internet penetration rate. The
third type, service-based intra-platform competition, relies on bit-stream mandatory
access. Because of declining in investment by newcomers and consequently, a reduc-

tion in the Internet penetration rate, it should be gradually abandoned. It goes without
saying that both forms of intra-platform competition depend on access regulation
[15].
In addition, an upsurge in the number of Internet service users on the one hand
and the willingness of customers to receive faster and higher quality services, on
the other hand, lead ISPs to a wider use of optical fibers. But with the high cost of
purchase, installment, operation and maintenance of optical fiber, ISPs fail to fulfil
their expected revenue. So, ISPs have come to the conclusion that it is to the benefit
of all of them if ISPs are in cooperation rather than in mere competition, in some
cases, such as developing required telecommunication infrastructure. The existence
of a resource sharing or shared infrastructure between competitors [110], which is
called coopetition (the fourth type of competition), makes them use scalability and
dramatically reduces the costs and risks and contributes to the profitability of each of
the companies involved in this campaign [16]. Moreover, shared infrastructure can
be considered as a kind of resilience optimization, which on the one hand, increases
the operator’s infrastructure capability and on the other hand, it will be a guarantee
against random disconnections [32].
Key suppliers In place of key suppliers, in many business models, the term ‘key part-
ners’ is used. Accordingly, key partners of ISPs can embrace infrastructure suppliers,
equipment vendors and network operators. Additionally, in order to differentiate
in the provision of services, it is also necessary to have content and application
providers’ participation in offering services [18].
4.1.2 Second level: offering level
At this level, the type of business value proposition, distribution channel, revenue
stream and cost structure are explained as follows:
Value proposition Value proposition consists of a selected package of products or

services to meet the specific needs of a particular customer, which can provide a
competitive advantage to the business. Value proposition of ISPs (within the defined
scope) is, in particular, access to the Internet [18]. It is worth mentioning that for the
provision of access to broadband Internet, in wire line and fixed wireless mode, DSL,
WiMAX and LTE13 technology are employed, respectively [109]; Wi-Fi technology
as a supplement to these technologies is recruited [46].
Distribution channels In all businesses in general and in the ISP business in particu-
lar, the distribution channel plays a critical role in providing value to the customers.
Therefore, the value is usually proposed with appropriate distribution channels for
its presentation in the form of a product or service [18]. By creating a portal (in the
13 Long Term Evolution

form of a contact center) this group of service providers ease and expedite the access
of their customers to the network [105].
Revenue stream A revenue stream is the revenue earned by a company in return for
offering value to the customers. Therefore, it is first essential to determine what share
of the revenue is allocated to each revenue stream, and decide for what value, each
customer segment tends to pay and what kind of payment each customer prefers[94].
Studies illustrate that ISP revenue is based on user’s subscription and traffic agree-
ments with other ISPs [18, 26]. It is worth mentioning that by sponsoring and
providing training programs, the government can encourage more access to and use
of the Internet, and provide the platform for (revenue) growth of ISPs [113].
Cost structure In every business model, the cost structure depends not only on the
level of value network integrity, the type of partnership and investment [41], but
also on how resources are shared. In other words, the oversubscription of resources
significantly reduces the cost of ISPs, but at the same time lowers the QoS [104].
Cost structure of all the Internet-based businesses (including ISPs) can be defined
based on several factors consisting of costs of hardware and software, costs of cus-
tomer support, IP transport, and information content and provision [112]. This is why
cost structure for IaaS14 services can be considered in the form of six major factors
including electricity, hardware, software, labor, business premises, and service [8].
It should be mentioned that generally factors such as connection quality, eventual
destination, and nature of the MultiMate connection affect the cost structure of all
businesses [108] and residential broadband traffic has an impact on the cost structure
of the ISPs [38]. It is predicted that the cost structure of future ISPs will be in the
form of concentrated investment and joint investment models [41].
4.1.3 Third level: activity and organizational level
At this level, the three components including key activities, key processes and the
type of value configuration in ISPs are explained as follows:
Key activities Key activities of ISPs can include network promotion, contract
management, service procurement, and infrastructure operations [18]. However,
in addition to key activities, success in creating the proposed value requires the
proper definition of key processes (sequence of performing activities), and value
configuration (the way in which these processes are implemented).
Key processes The Telecommunication Management Forum (TMF) defines three

main processes of service Fulfillment, service quality Assurance, and Billing, which
is briefly called FAB, for all communications and information service providers
(including ISPs) [57].
Value configuration According to studies conducted so far, the value configuration

in IT is value shop and in CT is value network [106].
14 Infrastructure-as-a-service
4.1.4 Fourth level: resource level
Key resources In order to create and deliver the offered value in any business,
there is a need for specific key resources tailored to the type of business. In gen-
eral, the resources of a company that involve technical, human, economic, and
social resources are considered as a key resource when they provide a ground for
a company’s ability, growth, and development in a competitive market. Neverthe-
less, resources and connections (between resource providers) are two important
components that bring about innovative opportunities for a business [50].
4.1.5 The seventh component
Scope of management & longitudinal dimension This component within the organi-
zation is called scope of management and outside the organization, as the longitudinal
dimension that covers the model’s dynamism contains cognitive and cultural limi-
tations related to the perception of value by customers. In other words, the seventh
component within the organization seeks to point out that the precise definition of
business components alone is not adequate and the role of management in adapt-
ing and sorting components of a business to maintain its competitive advantage
should not be unnoticed. The seventh component outside the organization in all
businesses (including ISP business) seeks to ensure that their business value propo-
sition is understood by its customers, with regard to mental, perceptual, cognitive
and even financial barriers and limitations. Obviously, the realization and perception
of a creative idea in the form of business value proposition is time-consuming, and
influenced by culture and social constraints in addition to the constraints mentioned
earlier. Therefore, we can presumably state that the seventh dimension of Hedman
and Kalling’s ontology is one of the most important aspects of the distinguishing
features of this meta model compared to other meta models and one of the main rea-
sons for picking out this model. This could be due to the different market share and
competitive advantage of the two identical ISPs corresponding to the business com-
ponents. In other words, the role of a business model is to provide a holistic picture
of a business and how its business components interact at a given time; but it cannot
respond to the overall business performance and guarantee its competitive advantage
[27]. Therefore, in addition to elucidating its components to ensure the sustainable
growth of a business, it necessitates focus on management and the architecture of the
internal dimensions of the business. Therefore (in ISPs, like other businesses), the
relationship between enterprise architecture and the business model should not be
disregarded when identifying business requirements and competencies [52].
According to the obtained results, the ISP business model (based on Hedman and
Kalling’s ontology) using the secondary data is presented in Fig. 4. In the described
business model, three components including key resources, value configuration and
cost structure have not been elaborated. Hence, this model is not complete. The fol-
lowing section focuses on elaborating these three components and complementing
other components (if any) based on interviews with IT and CT experts.
Five Forces of Porter

Threat of new entrant: high entry cost; not a serious threat
Bargaining of suppliers: higher independency; lower
bargaining power
Customers Bargaining of customers: depends on the quality and price
Market End users + of services
Level Network Competitors The threat of substitute products: 3G, 4G and 5G especially
operators + Other ISPs by emerging of smartphones
other ISPs Competitive rivalry: high competition intensity because of
providing intangible service
Value Proposition: Broadband internet access (access

provision)
Channels: Portal Longitudinal
Revenue Stream: Traffic agreement with other ISPs + User Dimension:
Offering subscription
Level To ensure the realization
Cost Structure: open of business value
proposition by customers
according to the different
obstacles and limitations
Scope of management: business
Activity
components configuration surveillance
and
Organization Activities: Service procurement + Network promotion +

Level Infrastructure operation + Contract management
Processes: FAB
Value Configuration: open
Resource Key Resources: open

Level
Suppliers: Infrastructure suppliers + Equipment suppliers +

Network operators + Content and application providers
Market
Level
Fig. 4 The ISP’s business model (based on Hedman and Kalling’s ontology [51])
4.2 A holistic ISP business model at the industry level
This section focuses on complementing the ISP business model in the previous step
(Fig. 4) and providing a holistic ISP business model within the defined scope, based
on the knowledge elicited from interviews with experts in both IT and CT areas. It
is noteworthy that the profile of selected experts, the number of them, their selec-
tion method, the way interviews were carried out and the data analysis method are
described in detail in Appendix B.
4.2.1 First level: market level
At this level, the Porter’s forces and the three components of customers, competitors,
and suppliers in the ISPs business are complemented.
Porter’s forces and customer segmentation were described completely based on

secondary data.
Customer relationship management [To provide value to customers in any form

including automated, self-service or in person, an ISP should boost the trust and
satisfaction of customers, which confirms the appropriate relationship with them.]
Competitors [In general, other ISPs can be considered as the main competitors of
an ISP. It is worth mentioning that one of the regulatory body’s main policies is
to provide a healthy competition environment and does not allow service providers
to violate the rules by antitrust or any other activities which threaten the healthy
competition.]
Key Suppliers [ISP sales agents in provinces and cities can also be considered as key
partners.]
4.2.2 Second level: offering level
At this level, the business value proposition, distribution channel, revenue stream and
cost structure are complemented.
Value proposition This component was described completely based on secondary

data.
Distribution channels [In ISP business, call center and public channels including
radio, television, billboards, and social networks are used for introducing and offering
value to customers.]
Revenue stream The appropriate revenue stream for each customer segment is based
on Table 7:
Cost structure [Mainly ISPs are restricted by two major factors (which impact on
cost structure); the first one is limitation in subscription. Fierce competition which
exists in the market, if ISPs oversubscribe, their customers would not be satisfied and
they move to their competitors. The second factor is the regulator body policy which
has restricted the service providers not more than 1 to 8 which means if they have one
Mega bit per second Internet gateway, they should not sell more than 8 Mega bit per
Table 7 The revenue stream of ISP customer segment
Customer segment Revenue stream
End users (or B2C) subscription fee + traffic volume

Network operators (and other B2B) Flat rate based on bandwidth
Other ISPs Traffic agreement
second to the customer. In general, the most important expenses for ISP companies
are related to the cost of the transmission media (including access links, backbone
links and gateway to other ISPs), the specialist human resources, the percentage for
the annual license fee paid to regulatory (as revenue sharing) and the cost of the
telecommunication and network equipment.]
4.2.3 Third level: activity and organizational level
At this level, three components of the ISP business model consist of key activities,
key processes and the type of value configuration.
Key activities and key processes were described completely based on secondary
data.
Value configuration [Value configuration in ISPs, which is an amalgamation of both

IT and CT is a value shop and a value network. In other words, on the one hand, due
to the unique solutions offered to solve the problem of specific customers in accor-
dance with the established standards, the value configuration of ISPs is considered a
value shop. On the other hand, by creating a network of customers in order to con-
nect them together for the exchange of information, products and services, the value
configuration of ISPs is considered a value network.]
4.2.4 Fourth level: resource level
Key resources [The most important key resources of ISPs can be the transmis-
sion media (including access links, backbone links and gateway to other ISPs),
telecommunication and network equipment and technical staff specialized in IP.]
4.2.5 The seventh component
This component was described completely based on secondary data as well.

According to what was cited above, a holistic ISP business model (within the
defined scope) based on Hedman and Kalling’s ontology at the industry level is
presented in Fig. 5.
It is not worth mentioning that the proposed ISP business model, as shown in
Fig. 5, was designed for the case lack of ownership of physical communication lines.
ISPs can or cannot own physical communication lines. It is worth noting that the
regulatory body (in order to ensure fair competition [78]) obliges the companies to
provide physical communication lines to provide the required infrastructure to other
ISP companies so that they can deliver Internet services to their customers. Hence,
ownership or lack of ownership of physical communication lines does not play an
important role in gaining the competitive advantage of an ISP. It goes beyond doubt
that it will be easier to elaborate the ISP business model with ownership of physical
communication lines. The business model of the ISPs (within the defined scope) who
own the physical communication lines as well, physical infrastructure provider (PIP),
Five Forces of Porter

Threat of new entrant: high entry cost; not a serious
threat
Bargaining of suppliers: higher independency; lower
bargaining power
Market Customers Bargaining of customers: depends on the quality and
Level End users price of services
+ Network Competitors The threat of substitute products: 3G, 4G and 5G
operators + Other ISPs especially by the emergence of smartphones
other ISPs Competitive rivalry: high competition intensity because
of providing intangible service
Value Proposition: Broadband internet access provision)

Channels: Portal + Public channels + call center
Revenue Stream: Subscription fee + Flat rate + Traffic volume
selling + Traffic agreement with other ISPs Longitudinal
Offering Cost Structure: Transmission media (Access links + Backbone
Level
Dimension
links + Gateway to other ISPs) + Skilled forces + Annual license To ensure the realization
to regulatory + Telecommunication and network equipment of business value
proposition by customers
obstacles and limitations
Scope of management: business
Activity
components configuration surveillance
and
Organization Activities: Service provision + Network promotion +

Level Infrastructure operation + Contracts management
Processes: FAB
Value Configuration: Value shop + Value network
Resource Key Resource: Transmission media (Access links +

Level Backbone links + Gateway to other ISPs) + IP Skilled
forces + Telecommunication and network equipment
Suppliers: Infrastructure suppliers + Equipment suppliers +

Market Network operators + Content and application providers +
Level Sale agencies in provinces and cities
Fig. 5 ISP’s business models at the industry level (based on Hedman and Kalling’s ontology [51])
also corresponds Fig. 5 with only slight changes in three components including key
resources, cost structure and key suppliers according to Table 8.
5 Validation and generalization assessment
This section focuses on evaluating the validation and generalization of the proposed
business model (see Fig. 5). Hence, at first the business components of Iranian ISPs
(at instance level) are analyzed and compared with the proposed business model com-
ponents. Then, the business model components of other ISPs in the telecom industry
(cloud service providers and content providers) are compared with the components
of the proposed business model.
Table 8 Three different components of business model of ISPs, who own the physical communication
Lines
Key resources Cost structure Key suppliers
• Skilled forces • Skilled forces • Equipment suppliers

• Telecommunication and • Annual license to regulatory • Network operators
network equipment
• Telecommunication and • Content and application providers
network equipment
• Sale agencies
5.1 Two case studies
In this part, the business components of two case studies (Shuttle and Pars Online)
at the instance level are analyzed based on Hedman and Kalling’s ontology [51] and
compared with the components of the proposed business model. Interestingly, the
managers of these two ISPs did not know much about Hedman and Kalling’s ontol-
ogy, but they knew the Canvas ontology quite well. Due to the shared components
of these two meta models, it did not make much difference in the validating process.
The not-shared components of these two ontologies include Porter’s five forces, com-
petitors and the time dimension. It is noteworthy that these components have always
been the mental concern of these professionals and have been considered apart from
the business model. To familiarize ourselves with the business model components
of these two ISPs, their documents, guidelines, business units, processes, customer
relationship and pricing service mechanisms were studied and some interviews were
conducted with some of the clients and managers about the current business model
components of these two ISPs. The accumulated results of comparing the proposed
business model components (Fig. 5) with the components of the business models of
the two cases (Shuttle and Pars Online) is shown in Table 9.
The result of Table 9 shows that there is perfect congruence between the internal
components of the proposed business model and an Iranian ISPs business model. But
about the environmental components of this ontology (competitors and Porter’s five
forces), there is no consistency. In other words, in generalizing the proposed business
model to the industry level, internal components are congruent but it is necessary to
be cautious about environmental factors.
In order to elaborate the dependency of environmental components on business
context, all four areas of the environmental analysis of Iranian ISPs are examined
according to Table 12 in Appendix C.
5.2 Other ISPs studies in the telecom industry
The results of the previous part (Section 5.1) indicate the dependency of the environ-
mental components of business on business context. Therefore, in order to generalize
Table 9 Comparing the proposed business model Components with Iranian ISPs business model Components
Hedman and The Proposed BM Shuttle BM Components Pars Online BM Components

Kalling’s BM Components
Components
Customer End users + Network End users End users

Operators + other ISPs
Competitors Other ISPs Other ISPs + TCI Other ISPs + TCI
Value Proposition Broadband Internet Access Broadband Internet Access Broadband Internet Access
Revenue Stream Subscription fee + Flat rate Subscription fee + Traffic volume selling Subscription fee + Traffic volume selling
+ Traffic volume selling + traffic

agreement with other ISPs
Cost Structure Transmission Media + Skilled forces Transmission Media (First- mile links Transmission Media (First- mile links
+ Annual license to regulatory + and international links) + skilled forces + and international links) + skilled forces +
Telecommunication and network Annual license to regulatory + Annual license to regulatory + Telecommunication
equipment Telecommunication and network equipment and network equipment
Key Resources Transmission Media + IP Skilled Transmission Media (First- mile links Transmission Media (First- mile links
forces + Telecommunication and and international links) + IP skilled forces and international links) + IP Skilled forces +
Network equipment + Telecommunication and network equipment Telecommunication and network equipment
Key Suppliers Infrastructure Suppliers + Infrastructure suppliers and network operators Infrastructure suppliers and network operators
Equipment suppliers + Network (TCI + TIC) + Equipment suppliers + (TCI+ TIC) + Equipment suppliers + Content
operators + Content and application Content and application providers + sales agencies and application providers + sales agencies
providers + sales agencies
Activities Service procurement + Network Service procurement + Network Promotion Service procurement + Network Promotion +
+ Infrastructure operation + Contracts management Infrastructure operation + Contracts management
Table 9 (continued)
Hedman & The Proposed BM Shuttle BM Components Pars Online BM Components

Kalling’s BM Components
Components
Promotion + Infrastructure
operation + Contracts management
Processes FAB FAB FAB
Value Configuration Value Shop + Value Network Value Shop + Value Network Value Shop + Value Network
Scope of Management BM components configuration BM components configuration surveillance + BM components configuration surveillance +
+ Longitudinal surveillance + To ensure the To ensure the realization of business value To ensure the realization of business value
Dimension realization of business value proposition by customers according to the proposition by customers according to the
proposition by customers different obstacles & limitations different obstacles & limitations
obstacles & limitations
Porter’s Forces 1. Threat of new entrant: high entry 1. Threat of new entrant: From TCI 1.Threat of new entrant: From TCI point of
cost; not a serious threat point of view, FCPs are new entrants view, FCPs are new entrants
2.Bargaining of suppliers: higher 2. Bargaining of suppliers: with providing 2. Bargaining of suppliers: with providing
independency; lower bargaining power FCP license to ISPs, the bargaining power FCP license to ISPs, the bargaining power of
3. Bargaining of customers: depends of TCI decreases TCI decreases
on the quality and price of services 3. Bargaining of customers: is high because 3. Bargaining of customers: is high because of
4. The threat of substitute products: 3G, of comparing quality & price of services comparing quality & price of services with other
4G and 5G especially by emerging of with other countries countries
smartphones 4. The threat of substitute products: 3G, 4G 4. The threat of substitute products: 3G, 4G and
5. Competitive rivalry: intense competition and 5G especially by emerging of smartphones. 5G especially by emerging of smartphones
because of providing intangible service 5. Competitive rivalry: high competition among 5. Competitive rivalry: high competition among
ISPs + between ISPs & TCI ISPs + between ISPs & TCI
a Business Model
the environmental components of the proposed business model to the industry level,
some degree of caution should be practiced.
The results from Section 5.1 also indicate generalizability of the internal compo-
nents of the proposed business model. It is apparent that the generalization of the
internal components of the proposed business model to the industry level requires
more investigation. For this reason, in order to be sure of the generalizability of the
internal components of the proposed business model to all ISPs in the Telecom indus-
try level, the internal components of the proposed business model are compared peer
to peer, with the internal components of other ISPs in the industry (including cloud
service providers and content providers). The results of this comparison appear in
Table 10.
The results of Table 10 are as follows:
• The value proposition component for the three groups of ISPs in Table 10 is
different. This was predictable; since other ISPs (beyond the scope of this study)
have gradually focused on providing new services such as cloud-based services,
content services and their sub services, based on Internet infrastructure, in the
form of new business lines.
• It is apparent that providing new services (different value propositions) requires
new key resources, a new cost structure and new revenue streams. Novelty of
the mentioned components does not mean they are in contrast to the components
described in the proposed business model. It means, by adding appropriate items
based on their value proposition, these components in business models of other
ISPs in the Telecom industry (content providers and cloud service providers) are
retrievable.
• Customer segment, key processes (FAB), and value configuration components
are the same for all the ISPs in the industry level
Hence, regarding the generalization of the environmental components of the proposed
business model to the industry level, because of their dependency on the business
context, some degree of caution should be practiced. The internal components of the
proposed business model can be leveraged as a basis for designing BM components
of other ISPs roles (beyond the scope of this study) which is/are dependent on the
Internet infrastructure. Therefore, the proposed business model (see Fig. 5) can be
considered as a basic model in the area of designing new business models.
6 Discussion
After describing a holistic ISP business model within the defined scope, based on
Hedman and Kalling’s ontology (Fig. 5), the focus shifted to validity and gener-
alization assessment of the proposed business model. For this purpose, in the first
stage, the proposed business model components were compared peer to peer with
the ISP business model components at the instance level (as presented in Table 9).
The results indicated the generalizability of the internal components of the proposed
business model and the dependency of the environmental components of the model
on business context. Then, in order to be sure of the generalizability of the internal
Table 10 Comparing the internal Components of the proposed business model with other ISPs in the
telecom industry
Internal The proposed BM BM internal components BM internal components

components? internal components in cloud providers in content providers
name
Value proposition Broadband Inter- • Infrastructure service • Digital content like pho-
net access tographs, digital music, or dig-
ital video
• Platform-as-a-service • Digital content refers to
information and data stored in
a digital format including: pic-
tures, movies, videos, music,
programs
• application service
Customer • B2C (end users) B2B + B2C B2B + B2C + may be content
segment embedding entity
• B2B (network opera-
tors + other ISPs)
Key resources • Transmission media • Accessing resources • Network resources
• IP skilled forces • Computation and stor- • Communication resources
age resources
• Telecommunication • Software license • Computing and
and network equip- requirement storage servers
ment
Key partners • Infrastructure suppliers • Infrastructure suppliers • Platform makers
• Equipment suppliers • Application suppliers • Content suppliers
• Application suppliers • Network operators • Content registration, man-
agement, and reproduction
• Network operators • Ad-agencies • Content distributer
• Content providers • Software & hardware
suppliers
• Sales agencies
Key processes FAB • FAB • FAB
• Security management • Content delivery process
processes
• Content distribution pro-
cess
• Caching-related processes
• Content personalization
process
Cost structure • Transmission media • Cloud storage cost for • Infrastructure costs
the data is more than the
data transfer cost and
computing cost
• Skilled forces • Selection of cloud • Cost of managing infras-
computing services and tructure
cloud types
Table 10 (continued)
Internal The proposed BM BM internal com- BM internal components

components? internal components ponents in cloud in content providers
name providers
• Annual license • Evaluation & • update cost

to regulatory Selection of Service
Provider
• Telecommuni- • Service charge • accessing cost
cation and net-
work equipment
• Implementation, con- • Bandwidth cost
figuration, integration
and migration
• Support • Reliability, stability and
security costs
• Initial and perma- • fixed costs related to
nent training producing the information
• Maintenance
and modification
• System failure
Revenue stream • Subscription fee • Subscription fee • Subscription fee
• Traffic volume sell- • Pay-per-use • Advertising
ing (pay-per-use)
• Flat Rate • Dynamic Pricing • Pay-per-view
• Traffic agreement • Sales and affiliate programs
with other ISPs
• Syndication + wireless
Value configuration Value shop + value Can be value shop + Can be value shop + value
network value network network
Scope of management Business components configuration surveillance
components of the proposed business model to the industry level, they were com-
pared peer to peer with the internal components of other ISPs at the industry (as
presented in Table 10). The results of the comparison for each level of Hedman and
Kalling’s ontology are as follows.
6.1 First level: market level
The results of generalization assessment of four components of this level (customers,

competitors, key suppliers and Porter’s five forces) are as follows:
Competitors and Porter’s Five Forces components: These two environmental com-
ponents are dependent on environmental factors (PESTEL) in the context of each
country or region. Therefore, their generalization to the industry level should be
considered cautiously.
Customer segment component: Based on both conducted comparisons at instance
level and industry level (according to Tables 9 and 10) the customers component is
generalizable to the industry level.
Key Suppliers component: The results of the generalization assessment of the key
suppliers component at the instance level (according to Table 9) indicated that the
special conditions of two Iranian ISPs for supplying the required infrastructure lies
behind the difference in infrastructure supplier items for this component of a busi-
ness model. In other words, one of the infrastructure suppliers for the Iranian ISPs is
TIC, which simultaneously, is considered as a main competitor of them. So, there is
coopetition between TCI and the ISPs. The results of the comparison on the general-
izability of the key suppliers component at the industry level (according to Table 10)
indicated that this component depends on the type of value proposition and required
key resources for providing this value. Hence, it is apparent that the generalizability
of the key suppliers component at the industry level will also depend on the gen-
eralizability of these two components (key resources and value proposition). The
generalizability of these two components is examined at the resource level and the
offering level of Hedman and Kalling’s ontology.
6.2 Second level: offering level
The results of the comparison for the generalizability of three components of this
level including value proposition, cost structure and revenue stream at the instance
level (according to Table 9) indicated that these three components can be generalized
in this level. The main reason is, the two case studies and ISPs in this research have
the same scope which leads to the same value proposition and consequently the same
cost structures and revenue streams.
Regarding the generalizability of these three components to the industry level, it
should be mentioned that: the ISPs beyond the scope of this research (cloud service
providers and content service providers) based on the Internet infrastructure provide
new services and, consequently, have different value propositions. Providing new
services leads to new revenue streams. Moreover, providing different Internet-based
services requires key resources other than the ones presented in the proposed model
in this study. It is quite evident that adding new items to the key resources component
leads to new items in the cost structure component as well. Hence, considering the
dependency of value proposition of other ISPs in the industry on the value proposition
of the ISPs in this study, revenue structure and cost structure components for them
can be retrieved by adding a number of items to these components in the proposed
business model.
6.3 Third level: activities and organizational level
The results of the generalization assessment for the three components at this level
(scope of management, key processes and value configuration) are as follows:
Scope of management component: The results of the comparison on the general-
izability of this component (at both instance level and industry level) indicated that
merely defining the business components is not adequate and the role of management
in adopting them should not be undermined. Therefore, this component in the pro-
posed business model is generalizable to other ISPs at both, instance and industry
levels.
Key Processes component: Regarding the generalizability of this component, it is

noteworthy that according to eTOM (enhanced telecom operations map), fulfillment,
assurance and billing (FAB) are the main processes of telecom service providers.
Hence, this component in the proposed business model is generalizable to other ISPs
at both, instance and industry levels.
Value configuration component: The obtained results indicated that this compo-
nent, which encompasses value network and value shop, is also generalizable to other
ISPs at both, instance and industry levels. In other words, on the one hand, due to
the unique solutions offered to specific customers in accordance with the established
standards, the value configuration of all ISPs has been value shop. On the other
hand, by creating a network of customers in order to connect them together for the
exchange of information, products, and services, the value configuration of all of
them is considered value network.
6.4 Fourth level: resource level
This level includes the key resources component. Elaborating the key resources
component at both instance and industry levels is dependent on the type of value
proposition. The results of the generalization assessment component at instance level
(according to Table 9) indicated that this component can be generalized at this level.
The reason is that the two case studies and ISPs in this research have the same scope.
Regarding the generalizability of this component to the industry level, it should be
mentioned that, due to the dependence of value proposition of other ISPs at the indus-
try level on value proposition of ISPs in this study, key resources for other ISPs can be
retrieved by adding certain items to this component in the proposed business model.
Therefore, based on all the obtained results in line with the generalizability of the
proposed business model, it can be said that:
• Considering the dependency of the environmental components of the proposed
business model on business context, their generalization to the industry level
should be considered cautiously.
• Regarding the generalizability of internal components, it can be concluded that;
the four internal components of scope of management, value configuration, key
processes, and customer target are generalizable to the industry level. Due to the
provision of different Internet-based services in ISPs at the industry level the
value proposition component in the proposed business model is not generalizable
to all the industry. Regarding the generalizability of the other internal compo-
nents including key resources, cost structure, revenue stream and key suppliers,
it should be mentioned that the value proposition of other ISPs in the industry
relies on the value proposition of ISPs within the defined scope. Hence, items for
the four above-mentioned internal components in the proposed business model,
based on the inheritance law, can also be observed in the internal components
of other ISPs at the industry. In other words, by adding certain items to the four
internal components of the proposed business model, it is possible to design these
components in other ISPs at the industry level.
Therefore, the proposed business model can be considered as a basic model in the
area of designing new business lines and new business models, especially in the area
of new Internet-based technologies.
7 Conclusion
Given the significance of the Internet infrastructure in new Internet-based business

logic, notably its centrality in macroeconomic growth of countries [69, 101], one
of the important businesses can be considered to be the Internet Service Providers’
business (ISP business). Accordingly, in this study, after defining the scope of ISP
business in this research (connectivity service provision), we focused on illuminating
their business model within the defined scope at the industry level. This research
entailed a number of contributions. The first one is describing ISP business model
components that have been reported in the research conducted within the defined
scope, which are applicable in the interpretation of ISP business model components
in this scope. The second one is, elaborating on three components of ISP business
models including key resources, value configuration and cost structure that have not
been reported in the research literature (within the scope). It should be noted that
these three components have been introduced in the research literature of other ISPs
in the industry (beyond the scope of this research). Hence, inspired by the literature
of other ISPs at the industry and taking benefit of the interview with the experts in
the fields of IT and CT, these three components were elaborated within the defined
scope. The last one is, providing a holistic ISP business model using Hedman and
Kalling’s ontology.
In order to propose a holistic business model of ISPs, three steps were designed.
In the first step, among the business model description ontologies, Hedman and
Kalling’s ontology was selected. In the next step, ISPs business model components
were illuminated based on the secondary data as well as the expert’s opinion at the
industry level and a holistic business model for ISPs was proposed. In the third step,
in order to validate and generalize the assessment of the proposed business model,
ISP business model components were analyzed and compared separately with the
proposed business model components at instance level and other ISPs business model
components at industry level (beyond the scope of this study). The results of this
comparison indicated that, considering the dependency of the environmental com-
ponents of the proposed business model on business context, their generalization to
the industry level should be considered cautiously. Regarding the generalizability of
internal components, it can be concluded that the four internal components including
scope of management, value configuration, key processes, and customer target are
generalizable to the industry level. The value proposition component is not general-
izable to the whole industry, because ISPs provide a high variety of Internet-based
services at the industry level. Regarding the generalizability of the other internal com-
ponents including key resources, cost structure, revenue stream and key suppliers, it
can be concluded that, due to the dependency of value proposition of other ISPs in
the industry on the value proposition of ISPs within the defined scope, by adding cer-
tain items to the four above-mentioned internal components of the proposed business
model in this study, it is possible to design these components in other ISPs in the
industry level. Therefore, the proposed business model can be considered as a frame-
work for designing ISP business models in the industry. Furthermore, this model can
be used as a framework for predicting and better understanding opportunities based
on new Internet-based technologies, so that the creation of new Internet-based ser-
vices, new revenue streams and ultimately new business models and new value chains
[9] can be modeled through the proposed business model. Elaborating a holistic ISP
business model also leads to clarify its value structure which leads to the creation
of new and sustainable business models [87]. In addition, describing such a model
results in a better level of understanding of market needs and making a compatibility
between market needs and the value structure. Such a model can be a great help to
ISP managers to identify the position of their business in the ISP market and change
their classical view toward the value chain [87]. It also facilitates a deeper perception
about different aspects of the business and the market potentials as well [87], and
consequently reduces the risk of investment in this business.
It should be mentioned that the obtained results are based on one study and
some components of the proposed business model, especially the environmental
components, might need reconsideration or reevaluation due to different contexts in
different regions or countries.
One of the limitations of this study, which in turn has influenced the choice of how
to do it, is the lack of rich theoretical resources in the ISP business within the defined
scope. It is very surprising that, despite the importance of Internet infrastructure pro-
vision in the country’s economic growth, there has not been much research in this
regard. Of course, for many readers, the focus of this study on the significance of the
ISP business looks exaggerated, and with the view that the Internet penetration rate
being able to grow to a certain extent and ultimately saturating eventually, they might
not be able to imagine a prosperous and appealing business for its future. In this
regard, it is worth noting that the implementation of many new Internet-based tech-
nologies such as IoT, as one of the top ten trends in the future [17], are dependent on
Internet infrastructure. It goes without saying that in this new field, newcomers will
emerge and compete with ISPs. But what is certain is that current ISPs will be more
agile than newcomers to this area and more likely to grow and develop due to the
existing communication ground. Therefore, we will not only see an increase of ISPs,
but the created opportunities will add to their future attractiveness and revenues. But
it is interesting to know what kind of business models will emerge with the advent of
IoT. How will the ISP business model change to serve this new user (thing)? These
interesting issues are suggested for future research.
Appendix A: The results of content analysis using Atlas-ti software
To provide a logical segmentation of research studies, content analysis with an open

coding method was conducted using the Atlas Ti software. The results of the imple-
mentation of the steps of the open coding method (see Section 3.1) are presented in
Figs. 6, 7 and 8.
Previous
researches
Domains {0-3}
Types of Business
Important elements ISP Business
Models {10-1}
in determining the Domain {44-6}
type of BM {1-1}
Economic role of ISP ISP Business

Business {4-1} Opportunities {9-1}
ISP Business Innovation in ISP ISP Business

components {3-1} Business Model {11-1} Environment {3-1}
Fig. 6 Segmentation of previous research into eight different codes
(The ISP Business domain family consists of an economic role of an ISP busi-
ness + an ISP business component + innovation in ISP BM + an ISP business
environment + an ISP business opportunities family)
Appendix B: Interview process
As outlined in the third section of this research, in order to complete the business
model based on the secondary data (see Fig. 4) and elaborate all ISP business model
Previous
researches
Domains {0-3}
The researches have

Important ISP Business focused specifically on
Types of
elements in Domain {44-6} ISP business in Telecom
Business
determining the industry
Models {10-1}
type of BM {1-1}
The researches
The researches
have focused
have focused on Economic role
on different
external or of ISP Business
types of Meta Opportunities
internal elements Business {4-1}
models and {9-1}
as important
their elements
factors in
The researches Business Innovation in Business The
determining the Environment
have focused components Business Model researches
type of BM {3-1} {11-1} {3-1}
on the impact have focused
of broadband on possible
internet access Theses These Theses solutions for
on GDP researches in researches have researches improving
growth ISP Business focused on, the have focused ISP BM to
domain, have necessity of on external or cater industry
described innovation in environmental needs and
some kinds of ISP BM and elements understand
ISP BM presenting the which have business
components possible impact on ISP opportunities
solutions. BM
Fig. 7 Eight code explanations

a The family of the code of economic role of ISP business b The family of the code of important elements in determining the type of BM
d The family of the code of ISP business environment
c The family of the code of innovaon in ISP BM
f The family of the code of ISP business opportunies
e The family of the code of ISP business components
g The family of the code of types of bussiness model
Fig. 8 Each of the eight code families
components, the results of interviews with the experts in the two areas of IT and CT
were utilized. Information about the selected experts and the interview process are
presented in Table 11.
It should be mentioned that, reaching to consensus based on oral interviews is not

simple, logical and acceptable. Hence, after conducting several oral interviews and
failing to reach consensus, using the Delphi method, the experts reviewed the views
of their counterparts. After raising their awareness, through studying the opinions of
other experts, an overall consensus was reached.
Table 11 Characteristic of interview process
Interview type Semi-structured: It means that based on reviewing the literature in

this area and identifying the existing limitations in the secondary data,
the question types were determined in advance, all the participants
were asked the same questions. The experts were free to express their
answers in any possible way
Interview questions Business model components in accordance with the Hedman and
Kalling ontology
Data gathering procedures Recording and note-taking of the answers to interview questions in the
form of voice or text
Data analysis method Interpretive Analysis: Inspired by literature on other ISPs in the indus-
try, some ideas on unexplained components in the existing literature
(within the defined scope) were obtained. These helped in the forma-
tion of the subjects and concepts that were needed to be coded in the
interview analysis. In this way, the codes were defined, and accordingly
new concepts were extracted from interview data. In other words, based
on this analysis, firstly, the interview transcripts were reviewed a num-
ber of times. Each time the irrelevant, repeated or appositive sentences
were omitted and significant unrepeated ones were highlighted. Next,
the frequency of the codes in the highlighted points in the responses
were obtained, the directions of the responses with the questions were
specified, and codes (the frequency of the words) were considered. In
this way, the concepts of the transcripts were analyzed and interpreted.
Finally, in order to be certain about the analysis, a peer review was
conducted
Analysis unit ISP organization
Population size 25 experts from 12 internal ISPs
Sampling method Snowball sampling procedure was used. To be more precise, each
expert introduced another expert in the industry. Based on the nature of
qualitative research, the selection of new experts continued until data
saturation. In other words, the number of experts was not determined in
advance, and their selection continued until the addition of a new expert
did not add up to the obtained results in the previous phase (the result
of the consensus of the experts after data analysis using the Delphi
method)
Experts’ educational level Bachelor’s and Master’s degrees in telecommunication engineering, IT
engineering and IT management
Experts’ position Senior executive, middle managers, technical managers
The number of interviews The number of interviews was not determined in advance and the
for each business compo- interview procedure was repeated until data saturation
nent
Appendix C: Four areas of environmental analysis of Iranian ISPs
In this part, all four areas of environmental analysis of Iranian ISPs are examined in
Table 12.
Table 12 Examining the four areas of environmental analysis of Iranian ISPs
1. Market forces Market problems: Market problems in Iran involve comparing speed and band-
width inside and outside the country, increased customers’ expectations and
underrating the services provided to customers.
Market segments: The most important growth potential and the desired segments
of ISPs in Iran are youth and students.
Demands and requirements: In Iran, the most crucial needs of ISP customers
are high speed and quality, which are themselves dependent on the quality of
communication links given by two companies, TCI and TIC.
Costs of switch: In Iran, ISPs seek to raise the switching cost for their customers,
sometimes they even offer free xDSL devices to their customers.
Revenue attractiveness: The revenue attractiveness of Iranian ISPs is high and
the average revenue per user (ARPU) of a number of them is more than 200,000
RIs, which is going to increase in the coming years.
2. Industry forces This sector includes five forces: competitors, new entrants, substituted products,
suppliers and stakeholders. For the first four forces in the Porter’s forces section
of Table 9, the necessary explanations were presented. But with respect to the
fifth force, key stakeholders of Iranian ISPs are authority regulations, TIC, TCI,
customers, government, parliament and the council of competition.
3. Key trends Technology trend: In Iran and other countries, in order to identify the trends
of technology, continuous monitoring has been carried out to make sure that to
the extent possible, the best and most up-to-date technologies are used with the
highest quality.
Regulatory trend: This section includes identifying rules and regulations influ-
encing business. ISPs in Iran are regularly monitored and evaluated, and
restrictions are imposed on them when they apply for a license to increase band-
width and transfer speeds, which are mostly subject to security and political
considerations.
Social and cultural trend: Iran entails a young and technologically-oriented soci-
ety. Hence, the customer awareness of the product is high and technological
changes have a positive impact on demand. There are, of course, some cultural
restrictions imposed by religion and the regulatory body put some limitations to
end users bandwidth.
Political-economic trend: The political conditions of each country have impact
on GDP per capita and economic prosperity. In the case of the ISPs market in
Iran and other countries, there is a mutual relationship between the growth of the
Internet penetration rate and the increase in GDP per capita. This means that on
the one hand, with the increase in GDP per capita, the Internet penetration rate
has increased, and on the other hand, according to research studies, a growth of
Table 12 (continued)
10% in the Internet penetration rate has resulted in 0.57 to 0.59% increase in
GDP per capita [24]
4. Macro-economic World market conditions: In developed countries, though most people and busi-
forces nesses have access to the Internet, ISPs should develop in order to fulfill
increasing demand for more bandwidth due to popularity of smartphones and
boosting content. In Iran, there are people or businesses which have not con-
nected to the Internet yet. So, Iranian ISPs need to develop their networks more
and more in order to fulfill the customer needs.
Capital market: In Iran the capital market has no significant effect on ISP busi-
nesses because few of them are active in this market. So, the fluctuation in the
capital market has no effect on ISP businesses.
Consumable materials and primary resources: Part of the ISP’s resources which
include inter-provincial, intra-provincial and international links are supplied by
domestic companies. As for other sources, it can be claimed that the manpower
market is relatively satisfactory and telecommunication equipment is mostly
imported from abroad, whose price and quality depend on the political and
economic conditions of the country.
Economic infrastructure: In Iran, due to the existence of more than 100,000 miles
of optical fibers, the public infrastructure of ISP business is ready and well-
suited.
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Business models of Internet service providers

Article in Netnomics · May 2019

Payam Hanafizadeh Parastou Hatami

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Business models of Internet service providers

Payam Hanaﬁzadeh1 · Parastou Hatami1 · Erik Bohlin2

Accepted: 14 February 2019 /

Keywords Internet service providers · Business model · Telecom industry ·

1 Allameh Tabataba’i University, Tehran, Iran

Content Rights Online Services Enabling Services Connectivity User Interface

E- Retail (B2B) Design and Hosting

e.g. Apple, Lenovo,

Made for Digital Fixed Access

Fig. 1 Internet Value Chain (www.GSMA.com/2016/05/The-internet-Value-Chain) M2M: Machine-to-

Table 1 ISPs’ business lines in the telecom industry [6]

1. Connectivity service providers 2. Information service providers

Access service providers Content providers

Table 2 Three main broadband business roles (https://ec.europa.eu/digital-single-market/en/actors-broadband-

1. Physical infrastructure 2. Network provider (NP) 3. Service provider (SP)

business model. In other words, in order to take advantage of opportunities

Data bases 243+ 103 Based on 67 + 32

Fig. 2 Selection process

4 Telecommunication Company of Iran

Fig. 3 Current communication chain of Iranian ISPs

as a competitor of Iranian ISPs in providing Internet services. However, after grant-

3 Literature review and data gathering

6 Private Access Provider

3.1 Studies on the ISPs business

3.2 Fundamental basic theory

Main class Subclass Papers

business Mangal et.al [79] Ghezzi and Dramitinos [42]

innovation in Sorescu et al. [111] Stamison et al. [114]

business Adi, 2015 [1]

Main Class Sub class Papers

economic role of Qiang et al. [101] Koutroumpis [65]

researcher, a senior manager, or an investor from a particular business model varies

8 Korean Information Infrastructure

3.3 Studies on other ISPs businesses

4.1 Describing ISP business model components

12 They are presented in the fourth row of Table 3.

Business Business Ecosystem Value Other

Customer segment + channels • Camponovo and Pigneur [18] • Chiou [23]

Competitors • Bouckaert et al. [15]

Five forces of Porter • Adi [1]

4.1.1 First level: market level

Components name BM components in cloud BM components in con-

Components name BM components in cloud BM components in content

a FAB: Fulfillment, Assurance and Billing

Customers This section includes analyzing customer segmentation and customer

Table 6 Analysis of Porter’s five forces in ISPs business

access. Because of declining in investment by newcomers and consequently, a reduc-

4.1.2 Second level: oﬀering level

Value proposition Value proposition consists of a selected package of products or

13 Long Term Evolution

4.1.3 Third level: activity and organizational level

Key processes The Telecommunication Management Forum (TMF) defines three

Value conﬁguration According to studies conducted so far, the value configuration

4.1.4 Fourth level: resource level

4.1.5 The seventh component

Five Forces of Porter