Competition will decrease as large firms bundle services together, pressuring small players
Los Angeles, CA (PRWEB) August 18, 2012
The move toward ubiquitous internet access and the exponential growth of internet traffic has benefited the Internet Service Providers industry in the past five years. “Regulatory overhaul in 2012 will necessitate government-subsidized network expansion and increase the number of US broadband connections, driving revenue growth,” says IBISWorld industry analyst Kevin Boyland. From 2007 to 2012, IBISWorld estimates industry revenue will grow at a 3.4% annualized rate to $79.3 billion, with a push toward broadband expansion in rural markets boosting industry revenue 7.6% in 2012.
Business customers have emerged as the most lucrative growth market in the Internet Service Providers industry. “Businesses yield high profit margins for ISPs, with dedicated internet access services contributing about a quarter of all industry revenue,” adds Boyland. The increasing usage of cloud computing (which involves accessing data and software through the internet) is boosting demand for high-speed access services. Additionally, ISPs are increasing their array of value-added services, acquiring cloud and infrastructure consulting firms to profit further from the business market. As demand for value-added business services continues to increase, industry revenue is forecast to grow over the next five years.
The Internet Service Providers industry has a moderate level of market share concentration and is characterized by a dominant group of larger players and numerous small players. Concentration increased over the past five years because of merger and acquisition activity. Major player Century Link's acquisition of Qwest Communications more than doubled its market share in 2011. In an effort to increase subscriber numbers and to expand business service offerings, major firms like AT&T and Comcast have acquired rural ISPs and cloud infrastructure providers. Over the next five years, industry consolidation will continue as ISPs increase subscriber bases and network scope. As the market converges, distinct technological systems are evolving toward a set of data services that are bundled together and marketed as one product. Major operators now offer packages that bundle TV, voice, internet and mobile services together. Smaller ISPs that are unable to compete on price with larger operators' economies of scope will find niche markets, such as small businesses, or leave the industry.
Consumer sentiment about the internet as a necessity rather than a luxury will pressure industry operators in the future; service prices and network management practices will fall under increasing scrutiny. As internet traffic continues to increase, ISPs will exercise more control over their networks and will likely restructure their pricing to a usage-based model despite opposition from consumers. Issues like net neutrality (i.e. treating all internet traffic the same) may lead the FCC to assert more regulatory authority over the industry, pressuring profitability. For more information, visit IBISWorld’s Internet Service Providers in the US industry report page.
Follow IBISWorld on Twitter: https://twitter.com/#!/IBISWorld
Friend IBISWorld on Facebook: http://www.facebook.com/pages/IBISWorld/121347533189
IBISWorld industry Report Key Topics
This industry uses wired infrastructure to provide clients with internet access and related services such as web hosting, web page designing and hardware or software consulting related to internet connectivity. Operators (except telecommunications carriers) may also lease out capacity on their networks to support the network infrastructure of other companies (i.e. backbone services). This industry excludes wireless internet and VoIP services.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.