ISP Backbone Market Forecast: Flat Through 2002

Despite their crucial role in carrying traffic to and from the various ISPs, last year brought diminishing market capitalization to many of the biggest names in the ISP backbone marketplace.

by ISP-Planet Staff [January 23, 2002]

According to Cahners In-Stat/MDR there will be zero growth in the number of backbone connections used by Internet Service Providers (ISPs) in 2002. The independent research firm contends that backbone providers will need to focus on key decision criteria used by ISPs—such as price, reliability, reputation, financial stability, and availability of service—in selecting their backbone providers.

Daryl Schoolar, In-Stat/MDR senior analyst, detailed why the backbone market, along with the total wholesale ISP market, would experience little growth this year.

"The economy is affecting, not only the structure of the backbone provider market, but also the services they offer, and to whom they are offered," Schoolar said. "Backbone providers are being careful in not repeating the mistakes they made with the free ISP market."

In-Stat/MDR also found that:

• At the end of 2000, 10 backbone providers generated 92 percent of all wholesale ISP revenues.
• WorldCom had the largest market share with 44 percent.
• The next two largest wholesale ISP service providers were Genuity and Sprint with 12.5 percent and 9.4 percent market share respectively.

A study compiled by ISP-Planet's sibling site, Jupiter Direct, in June 2001 reported that WorldCom (UUNET) indeed leads the backbone market. Not accounting for port wholesales, UUNET served 25 percent of the ISP market segment, followed by Sprint with 19 percent and Qwest with nine percent. Conversely, Genuity only served about 3.6 percent of the ISP market in North America.

The report, Navigating Risks and Opportunities in the North American Backbone Market, forecast that U.S. and Canadian service providers would spend more than $81.6 billion on backbone services in 2001. But that more than $10.3 billion in IP transport sales would likely shift providers through the end of last year.

Seven backbone providers—360networks, @Work, CAIS, e.spire, Exodus, PSINet, Winstar—filed for bankruptcy protection, were acquired or commenced aggressive reorganization plans since mid-2001. According to Jupiter Direct, these companies accounted for about 6.9 percent of the North American backbone market. This is equivalent to $5.6 billion in sales, or more than half of the total sum the research firm forecast would change hands by 2002.

The 2002 report from In-Stat/MDR, Watching the Bandwidth Flow ­ The 2001 ISP Backbone Market, examines the ISP backbone and wholesale ISP markets and covers such topics as backbone service provider selection criteria, speed of backbone connections, and method of connection.

The study also indicated that T-1 feeds remain the most common speed used in backbone connections. This is followed by T-3 connections. Along with market share of the top 10 wholesale ISP service providers, the report also includes five-year forecasts for the number of backbone connections, speed of the connections, and wholesale ISP revenues.

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