Boom time for ISPs
By Jim Hu
Staff Writer, CNET NEWS.COM
March 18, 1998, 4:35 a.m. PT
URL: news.com
Internet service providers are expecting strong revenue growth this year, according to a survey
conducted by KPMG and Planet Direct.
The robust estimates among ISPs were helped in part by confidence in the business subscriber
market, the survey stated. While most ISP subscribers are not businesses, the study showed that
business customers generate $33.95 per customer, while residential subscribers generated a
proportionally lower amount at $19.50 per customer.
The survey also showed that on average ISPs are expecting to grow 86 percent from 1997 to
1998. Further breakdown of the survey figures showed that the business subscriber market is
expected to grow 128 percent, compared to 66 percent for the residential market.
The finding suggests that churn rate, which measures the percentage of subscribers discontinuing
their ISP services, may play a significant role in the growth difference. While KPMG measures the
residential churn rate at 3 percent, business subscribers were found to be more consistent with
sticking to their services, and measured only a 1.6 percent churn rate.
Controlling churn has been a headache for many ISPs, who are trying to retain customers from
defecting to other ISPs by offering services and membership perks. Last month, a study released
by Strategis Group showed that ISPs were suffering churn rates five times higher than any other
telecommunications service.
Further results released yesterday showed that smaller local ISPs demonstrated more profitability
than larger national ones.
"The result contradicts assumptions made by some market analysts who suggest that lower
marketing costs among smaller ISPs lead to increased profitability," said KMPG spokesman Dylan
Charles in a prepared statement. "Instead, it shows that in some cases as more customers are
added, certain costs per subscriber increase."
Today's announcement also showed that email and Web hosting were the most popular products
ISPs offered, while news services and downloads came close behind.
Go to Front Door | The Net | Search | Short takes | One Week View
unix=speed . unix=hp
Copyright c 1995-98 CNET, Inc. All rights reserved. |
