Dial-Up Remains ISPs Bread and Butter

It has taken less than 10 years for ISP services to become welcome in more than half of U.S. households, but now there’s no where to go but down. According to Cahners In-Stat, consumer ISPs still see their revenue tied to dial-up Internet access.

The report “Hooked on Dial-up: Consumer ISP Trends and Market Share” from Cahners In-Stat Group found that despite strong forecasted growth in broadband access, most households will still be using dial-up access in the year 2005. In addition, 30 percent of U.S. households state that they still have no need or desire for Internet access.

“By the year 2005 there will still be just as many households without Internet access, as those using cable modems or DSL,” said Daryl Schoolar, senior analyst with In-Stat’s ISP Service.

As a result, consumer ISPs will still find a significant portion of their revenues coming from dial-up access. ISPs will not be able to afford to turn their backs on dial-up consumers altogether as they will continue to make up a substantial share of the market. These providers will also be forced to find their future growth potential in migrating dial-up users to broadband access, as the higher access fees associated with broadband will help to continue to grow ISP revenues.

According to a study of visitors to the ISP-Planet Web site by internet.com Corp. (the publisher of this site and ISP-Planet) and Edgix, shrewd ISP operators are actively seeking to diversify revenue resources by firing-up broadband services and increasing revenues from offering clients value-added services.

The study, “The ISP Market: Challenges and Strategies for the Future” found that 70 percent of the ISPs who responded said they currently offer broadband access and that high-speed services would be increasingly important to ISPs as the connectivity market continues to mature.

Currently, the most widely used platform for high-speed connectivity is DSL access, offered by 72 percent of the respondents. But this is likely to change, because DSL access presents more problems than solutions for ISPs looking to make a dent in the broadband market segment. Yet despite the increasing popularity of DSL, residential consumers remain largely ignorant on the subject of broadband connectivity.

ISPs are already deploying one broadband solution that could further erode DSL market share. Of those ISPs currently providing high-speed Internet access, 30 percent do so via fixed wireless technologies. And 40 percent of the ISPs that do not currently offer broadband access intend to offer fixed wireless solutions for home and office use. Because fixed wireless systems do not present last-mile bottlenecks like DSL and cable-based services, ISPs are readily adopting the technology.

Eighty-four percent of the ISP-Planet respondents said they generate additional revenue from services other than Internet access. These services include Web hosting, e-commerce and collocation services, as well as communications infrastructure services. But half indicated that they derive less than 25 percent of their total revenue from value-added services, more than 80 percent said add-on programs account for half of their total annual revenue.

The internet.com study also found that ISPs will find it difficult to increase their revenue from residential customers unless they can convince them to adopt either new high-speed technologies like fixed wireless access or pay for value-added services like training, email filtering and antivirus protection.

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