Business ISP Market Faces Consolidation in Face of Weak Economy

While there are well over 6000 ISPs (Internet Service Providers) offering business access services in the US, the top 10 competitors generated over 65% of all access revenues in 2000, according to market research firm, Cahners In-Stat Group. Continued economic challenges and decreased market capitalization will lead other service providers to either merge or go out of business. Currently a small percentage of ISPs generate the majority of business revenues, and there is little reason to believe this will change in the future. However, this will not result in the total demise of the smaller regional ISPs. Many of these smaller ISPs will survive by continuing to branch out into other services and by working with businesses that are often overlooked by national service providers. Daryl Schoolar, a Senior Analyst at In-Stat states, "While new services will continue to emerge and grow, access services will still account for over half of all business service revenues followed by Web hosting, non-hosting value added services, and hardware resell/leasing. Access service revenue dominance will continue because ISPs use this service as a platform upon which to build other services. However, all ISPs need to beef up access service by offering a SLA (Service Level Agreement). The SLA must not only offer customer retribution for service shortfalls, but also needs to be pro-actively monitored by the ISP." In-Stat has also found that: - The largest ISP, in terms of access revenues for 2000, was WorldCom/UUNet. The second largest ISP, in terms of revenue, was AT&T. Other ISPs with significant market share were - PSINet, Cable & Wireless, Sprint, Genuity, InterNap, XO Communications, Verio, and Qwest. - The consolidation of the DSL loop market has greatly impacted ISPs. Where previously ISPs had choices among loop suppliers, today the incumbent Bell is often the only supplier available. - The slowdown in the economy has hurt the business- oriented ISP customer base and, in turn, threatened the survivability of many of the ISPs. The report, "2001 Business ISPs - Service, Size, and Share" looks at the trends and services that will grow ISP revenues. Also included are five-year forecasts for business-oriented ISP revenues such as access and Web hosting and year-end 2000 market share for business access services.