Biggest Benefits Accrue to Market Leaders -- America Online and MCI WorldCom
FRAMINGHAM, Mass., April 19 /PRNewswire/ -- Revenues in the U.S.
Internet service provider (ISP) market are expected to soar 41% from
$10.7 billion in 1998 to $15.1 billion in 1999. They will increase at
a compound annual growth rate of 28% through 2003 to $37.4 billion,
making the ISP market the fastest- growing telecommunications market
ever. This data comes from a new International Data Corporation (IDC)
report, Internet Service Provider Market Review and Forecast,
1998-2003.
"The key growth drivers in the near term are a mix of new customers and existing customers' expanded spending," said Mark Winther, IDC's group vice president of worldwide telecommunications. "Growth in access will slow in 2001, but value-added services will pick up the slack. By 2002 and 2003, annual revenue growth will accelerate and increase by $5.7 billion and $8 billion, respectively. This reflects the 'coming of age' of ISP opportunities in value-added services such as e-commerce, virtual office, unified messaging, multimedia networking, etc."
IDC splits the ISP market into four market segments: corporate access, individual access, wholesale, and value-added services. In 1998 the individual access segment was the largest, with $4.7 billion in revenues. It will maintain its position as the largest segment until 2003, when value-added services will wrestle away the top spot.
America Online owns the largest share of the overall market, with 23%. MCI WorldCom is second, with 17%. "At the broadest level, two companies have clear predominance in the Internet services markets," Winther said. "They are MCI WorldCom in the business and wholesale markets and AOL in the consumer and value-added services markets." Indeed, IDC data shows AOL's 1997 share at 52% in the individual access market. The next closest competitor is MSN with only 12%. In the corporate access segment, MCI WorldCom's 1997 share was 27%, almost four times more than its closest competitor, IBM Global Network, which owned only 7% of the market.
"AOL and MCI WorldCom achieved dominance through a combination of extremely rapid internal growth and strategic acquisitions," Winther explained. "MCI WorldCom's Internet division is growing revenues in excess of 70% annually, and AOL is growing revenues faster than 60% annually."
Other than AOL and MCI WorldCom, IDC expects significant growth from AT&T/CERFnet, GTE Internetworking, and PSINet. However, IDC believes competition will heighten in the market. "Access will become a commodity and vendors will have limited opportunity to differentiate or compete other than on cost. To maintain growth and competitiveness into the first decade of the twenty-first century, ISPs will have to invest in value-added services," Winther said.
Internet Service Provider Market Analysis and Forecast, 1998-2003 (IDC #B17825) presents IDC's forecast for the U.S. ISP market. Forecast are provided by market segments and tiers that group service providers. Market drivers are examined. The report discusses vendor strategies and presents vendor profiles and market shares. It also discusses new and improved performance guarantees. To view the table of contents, please visit idc.com and search for IDC #17825. |
