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INTER@CTIVE WEEKJuly 7, 1997
Study: ISPs Set To Buy, Buy, Buy
By Randy Barrett
Network equipment and software vendors can expect another three years of big sales from U.S.-based Internet service providers.
That's according to a new study called "The ISP Opportunity 1997" from Infonetics Research Inc. (www.infonetics.com). The
San Jose research house projects the market will hit $3.6 billion this year on a growth ramp to $7.9 billion by 1999.
The numbers appear as many in the Internet access industry await the big shakeout. Infonetics Vice President Larry Howard
expects consolidation but reports there's currently little in sight.
"It won't happen as quickly as people say it will," he says.
The study's authors attribute the lag in consolidation to the effective grouping of small ISPs into larger roaming networks such as
AimQuest (www.aim.com) and I-Pass Alliance (www.i-pass.com).
"Smaller ISPs are improving their service capabilities by forming alliances and cooperatives while still offering hand-holding," the
report says.
The $13,500 study predicts the future market fortunes of local and wide area network hardware, routers, data ports and the
software that makes them all work. For example, WAN products are slated to grow from $868 million this year to $3.4 billion by
1999. E-mail access equipment is expected to soar from $700 million to $2.4 billion in the same time frame.
But pegging dependable numbers on the galloping steed of Internet access is a tricky task, and long-term numbers are difficult to
fix.
"It's hard to say what's going to happen after 1998. The Internet is moving so fast it's hard to see any end in sight," Howard says.
The report is based on interviews with 100 local ISPs and 13 major ones, including America Online Inc., AT&T WorldNet, BBN
Planet and Concentric Network Corp. Not surprisingly, 58 percent of spending will come from the telephone companies, the
report's authors predict.
The study notes another trend to which many ISP owners can relate: The real money is in business access. Howard says the
percentage of revenue from business services is growing, though it still represents only 38 percent of small providers' revenue.
Conversely, large ISPs get 73 percent of their revenue from corporate clients.
Slated for slower growth is local area network, or LAN, equipment, at $802 million in 1999, and customer-premises hardware
such as routers; Integrated Services Digital Network, or ISDN, lines; and firewall systems at $752 million in 1999. The main
reason is cost. The items are pricier, and ISPs don't plan to buy them as quickly, Howard says.
The report also says ISPs are starting to specialize in order to distinguish themselves and compete more effectively. Advanced Web
hosting is on the rise -- though the study doesn't cover this area -- and virtual private networking is on the planning sheet of 92
percent of the large ISPs.
The leading vendors in the survey are familiar: Cisco Systems Inc. for routers; and Ascend Communications Inc., Livingston
Enterprises Inc. and U.S. Robotics Corp. for remote access servers. The WAN switching market is a bit more open, with 3Com
Corp., Bay Networks Inc., Cascade Communications Corp., Cisco and Newbridge Networks Corp. battling for market share.
"That's a less dominated market," Howard says. |
