ISP Report

A new study from ISP-Market LLC analyzes ISP service offerings and spending projections, and uses the data to project future market trends.

by ISP-Planet Staff [March 12, 2003]

With a recent FCC ruling appearing to allow the Bells to cut competitors' DSL lines, the end of competition has never seemed closer. But a new report, "Taking the Pulse of the Internet Service Provider Industry: Evolutions and Revolutions driving the ISP Business in 2003" [sic.] from ISP-Market LLC says that ISPs can offer services besides broadband and profit from them.

During a three month study of the industry, the firm surveyed about 150 ISPs large and small, forming a snapshot of a market comprised of anywhere from 4,000 ISPs to 8,000 ISPs.

Wireless broadband and webhosting are two new business areas that continue to grow. But ISPs are also learning how to earn more from dial-up subscribers. With services such as webmail, content filtering, anti-spam, and anti-virus, ISPs are making the dial-up business even more profitable—unlike DSL, where ISPs were often overcharged and poorly served by the monopoly carriers, dial-up has always been profitable.

ISP-Market claims that 87 percent of the ISPs it surveyed expect to grow in 2003, and that dial-up continues to be the core of the ISP business, generating 45 percent of total ISP revenues in 2002.

The report says that anti-spam service is the most popular recent addition to the web of services offered by ISPs. It says that 64 percent of the ISPs surveyed had already adopted filtering solutions, and another 23 percent were planning to do so or evaluating plans to do so.

Webmail is also a popular service, and is already offered by 75 percent of ISPs surveyed, although large ISPs (defined as those with 50,000 subscribers or more) were more likely to have a webmail service in place.

Oddly enough, content filtering, including anti-porn services, seems to be more popular with smaller ISPs. Although only 29 percent of all ISPs surveyed offered this service, 53 percent of small ISPs (those serving 5,000 subscribers or less) already offered the service.

Discussions on the ISP-Lists have suggested that many ISPs consider and do not implement local Web portals. Only 20 percent of ISPs surveyed had already built portals or content sites for their subscribers, with another 14 percent planning to build a Web portal in 2003.

Small- and medium-sized ISPs are profitable and are experimenting with new services. However, unlike large ISPs and telcos, they cannot borrow to expand. The report says that the vast majority of ISPs with expansion plans are using cash on hand to finance expansion.

Times have changed—and changed fast—since ISP owners could sell their companies for $1,000 or more per dial-up subscriber. However, companies that are in the business for the long term will continue to experiment with new services, further increasing their profitability. That they will have to grow organically, without borrowing and without issuing stock, should be good for these businesses in the long term even as it limits the extent to which they can add services and take risks in the short term.

— End