National ISPs Still Kings of the ISP Hill

The US market for Internet services will include 7,785 ISPs generating revenues of $32.5 billion in 2000, according to research by Cahners In-Stat Group. Compared to 1999, these numbers represent 36 percent growth in the number of ISPs and 37 percent growth in revenues.

In-Stat’s report “The US ISP Industry: Revenues and Services” found the ISP market in the US remains dominated by the top of the ISP heap. Only 20 percent of the ISPs in the US operate nationally, but they generate 80 percent of total revenues.

“National ISPs are sitting at the top of the ISP market and their position will only get stronger,” said Daryl Schoolar, Industry Analyst for In-Stat’s ISP Strategies Service. “Not only are they profiting from their current mind-share with end-users, but they are also seeing strong revenue growth from wholesaling their national networks to regional market level ISPs.”

More than half of all business revenues are generated from Internet access, In-Stat found. But the migration of business activities to the Web has increased the importance of hosting, which now accounts for close to 30 percent of all business revenues. Consumers are still unwilling to pay for value-added services. Access subscriptions account for nearly 70 percent of all consumer revenues.

Consumer-oriented ISPs are no longer relying on just one access technology, but are instead moving toward offering multiple access technologies, including wireless, DSL, and cable, In-Stat found. According to a report by J.D. Power and Associates, smaller ISPs are using their strategy of offering high-speed Internet access options to threaten the dominance of the six largest ISPs.

The J.D. Power study found that smaller ISPs accounted for 52 percent of the new household subscriptions in the past year, led in large part by their DSL or cable modem options. The J.D. Power study also found that connection speed is mentioned by 79 percent of people as the reason they might switch ISPs, making it the most popular reason for a potential switch.

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