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ISPs Diversify Services to Meet Demand

Independent ISPs are not going to sit back while larger rivals corner the market on new services, a report by Jupiter Direct finds. In the wild west of Wi-Fi and satellite services, the humble antenna is the competitive equalizer.

by CyberAtlas Staff [April 12, 2002]

A report by Jupiter Direct, a division of INT Media Group, the parent company of this site found that ISPs are eager to break free from the ILECs' copper prison. The study, "ISP Evolution: Providing Services for the 21st Century", says that nearly 30 percent of the local ISPs surveyed plan on adding the ability to offer fixed-wireless Internet access in the next six months. Thirteen percent plan on adding satellite access capabilities.

"There was a time not that long ago when an ISP offering its customers 56K dialup access could provide a decent living for its proprietor and keep customers satisfied," wrote Jupiter Direct Senior Analyst Michael Pastore. "ISP customers, led first by businesses and now residential subscribers, have raised the bar for connectivity services. ISPs have responded to these demands by offering several means of Internet access at varying speeds and making additional services, such as webhosting, filtering, and security services available to users today."

The report also found that smaller players in the field would experience increasing pressure to convince existing customers to upgrade to new services and types of access to make such services profitable.

"Supplying broadband access is central to the current and future plans of ISPs," Pastore said. "But questions have arisen about the demand for broadband among residential customers, and ISPs are limited in creating this demand."

According to the study, newspapers and yellow pages are the most popular—and the most effective—advertising vehicles for local and regional ISPs, but more than one-third of local and regional ISPs devote only 1 to 3 percent of their annual sales to advertising.

The cost of acquiring new customers for advanced services such as residential fixed-wireless or leased-line access will decrease margins for ISPs and could create profitability issues in the near-term. Also punishing profitability for independent ISPs is the study's finding that 70 percent of all ISPs add less than 100 new users each month.

The study also found that 60 percent of local ISPs plan to add firewalling in the next six months, while 50 percent plan to add virtual private networking (VPN) services. Firewalling and VPNs have become popular security applications as the focus on data security has intensified.

According to a report by Cahners In-Stat Group, companies and organizations of all sizes are turning to firewall technologies as the preferred method of protection, with larger companies favoring hardware based-solutions and smaller companies using those that are software-based.

Use of VPN technology was cited mostly by In-Stat's panelists in the enterprise segment, as VPNs are used to secure access to a LAN from a remote location, or to interconnect two geographically separated LANs, larger companies and organizations have the most need for this technology. Overall, respondents to the In-Stat survey cited a reluctance to outsource security measures. Firewalls and virus-protection were the most likely of the categories to be outsourced.

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