Top U.S. ISPs by Subscriber:
Third Quarter 2003 Analysis

The incumbents are doing well, while other ISPs tread water.

by Alex Goldman ISP-Planet Associate Editor [January 2, 2004]

Note that AT&T WorldNet does not report subscriber numbers and is not on our list. Microsoft has not published updated numbers for MSN since its last annual SEC filing, and MSN may be losing subscribers. US Wireless Online has not yet published updated numbers and is temporarily off our list.

We would like to add RoadRunner to the list, but our data from AOL lists only "total cable broadband subscribers" and we do not know how many of those are already listed in our AOL total. AOL's cable broadband subscriber total is 3,046,000, up from 2,856,000 last quarter.

Note also that the RBOCs do not report dialup subscriber numbers. Although the dialup business is not fashionable, it should remain a cash cow.

In an aside, please note that the RBOCs have seen astonishing growth in their long distance business this year (which may make them even less willing to get into VoIP). For instance, SBC reported that it now serves 11.5 million lines, of which about half were added this year.

If you know of any other ISP that should be on this list, please do not hesitate to contact us.

Subscriber growth
During the third quarter of 2003, the incumbents (the RBOCs and the MSOs) did well while other companies did not do as well.

Note that the sole independent dialup ISP on our list, LocalNet, grew as fast as anyone else.

There continue to be some doubts about the veracity of published numbers, and some may be too optimistic. Publicly traded ISPs can distort their numbers directly, by reporting subscribers who don't exist, or more subtly, by claiming to have added a certain number of subscribers.

In July, for example, we pointed out:

Verizon claimed actual additions of 30,000 subscribers for the quarter, while reporting 160,000 new subscribers. These numbers just don't add up. The company said on Jan. 29, 2003, that in Q4, the company had "148,000 new net digital subscriber lines (DSL), for a total of 1.8 million lines" and then said on April 22, 2003, that in Q1, the company had, "160,000 net additional digital subscriber lines (DSL) in the quarter" but "1.83 million DSL lines in service as of the end of the first quarter."

These problems continue to exist. Insight BB, for example, provided the number of subscribers added, but did not disclose a total. The number we are using for Insight BB, 208,500, is therefore the maximum possible number of subscribers the company has. The actual number may be less.

Unique subscribers
In order to calculate the number of subscribers in the rest of the U.S., we have to take the number of subscriber in the U.S., provided by Jupiter Research, and subtract the number of unique subscribers in the ISPs in our list.

Jupiter Research estimates that there were 77.4 million residential subscribers in the U.S on September 30, 2003, up from 75.3 million on July 30, 2003, 75.2 million on March 31, 2003, and 74.3 million on December 31, 2002. The ISPs in our rankings account for approximately 44,974,927 unique subscribers. We try not to count any subscriber twice. For example, a subscriber to EarthLink DSL may also be counted in Covad's DSL numbers and in the ILEC's DSL numbers as well. We therefore do not count EarthLink broadband towards our total.

MSN did not disclose the composition of its subscriber base, and did not update its subscriber numbers. We are no longer making any assumptions about the size or composition of its subscribers, and for lack of better data, are assuming they are not unique.

None of the Regional Bell Operating Companies (RBOCs) reported dialup subscribers, so we count all dialup subscribers as unique.

We count EarthLink's 3.8 million user dialup base as not unique (even after discounting 294,000 prepaid People PC users, 295,000 "value" customers, and by an unknown number of customers obtained through the Apple relationship, all of whom may well use other ISPs in addition to EarthLink) as a tool of convenience to address concerns with numbers reported by other ISPs.

We suspect that at least 5 percent of the broadband subscribers listed for DSL and cable providers have not been connected or have tried to cancel their contract, and the number may be higher, but we do not have accurate churn data, and so discount the rest of EarthLink's subscriber base instead of discounting an arbitrary percentage of the monopoly providers' subscribers.

Finally, we assume that every user of United Online's free services has another account at a different ISP, so we count only United Online's paying subscribers.

This leaves us with the following unique subscriber numbers:

Note that this number is sharply higher than the unique subscribers from the previous quarter. That is partly because we lack data on MSN. Better data on MSN would sharply alter our calculations about market share. Also, we estimate that 2 million AOL users either have free accounts or subscribe to another ISP in addition to AOL.

Here's how we calculate the number of subscribers of the rest of the ISPs in the U.S. We substract the number of unique subscribers, 47,096,628, from the 77.4 million total individual subscribers. That gives us 33,349,372, or approximately 33.3 million subscribers for the rest of the ISPs in the U.S., which is 34.7 percent of the market. Note, however, that if large companies are inflating their own numbers by an aggregate total of more than 3,277,000 subscribers (the number of valid EarthLink subscribers we count as zero unique subscribers), the size of the small ISP market will be understated.

Market share calculation
So how many subscribers were not unique subscribers? The total subscribership of our ISPs is 62,784,828, up from 61,941,127 at the end of the previous quarter (which included US Wireless Online, an ISP not on the list this time). Of this, we believe that 44,050,628 are unique subscribers. The remainder, 18,734,200, we believe appear in the numbers of more than one ISP on our list.

In order to calculate market share, we add the remainder, 18,734,200, to the Jupiter Research subscriber total, 77,400,000, to get 96,134,200, which we use to determine the market share of each ISP. This is the total number of unique subscribers in the United States plus the number of double-counted subscribers in the ISPs listed in our table.

Here is a sample market share calcluation: AOL's apparent ISP total (including non-unique subscribers) is 24,658,000 (24.7 million on our table). We divide 24,658,000 by 96,134,200 to obtain the market share percentage shown on our table, 25.6 percent.

Transparency
In building this subscriber rankings, we are constantly frustrated by the quality of the data we are forced to work with, as explained above. We have, in contrast, endeavored to make our sources plain and our calculations obvious. We welcome feedback, and have received some constructive criticism from the readers of BroadbandReports.

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Online Resources:
	Jupiter Research: Broadband
	Subscriber Ranking History
	Subscriber Value by Category
	Worldwide Subscriber Numbers