News of their Deaths Are Greatly Exaggerated: IDC Finds Local ISPs Thrive
FRAMINGHAM, MA – JULY 30, 2002 – Contrary to popular belief, small, local Internet service providers (ISPs) are not dying off. They are in fact thriving. Although IDC never predicted their demise, the myth of consolidation into a handful of behemoth ISPs is widely believed. Local ISPs make up roughly a quarter of all Internet access accounts in the United States, and the total number of ISPs is approximately 7,000.
"Most local ISPs do not have an 'exit strategy.' Common misconceptions are that local ISPs are building their networks and subscribers in order to sell out to a national competitor," said Steven Harris, research manager for IDC's ISP Markets. "Most local ISP owners live nice lives and make mortgage payments off the proceeds from their ongoing operations and profits."
Local ISPs are very different from their national competitors in many respects, including:
They are profitable. With few exceptions, and unlike national ISPs, which lose money, most local ISPs generate a profit.
They are generally privately held. Most small ISPs are operated by their owners, and many local ISPs are owned by a family.
Subscribers stop by their local ISP's office frequently. One local ISP interviewed by IDC had an average of 15 subscribers per hour stopping by – so many
that the receptionist greets people at the door to direct traffic.
National ISPs do not always compete in less urban areas, sometimes allowing local ISPs to offer service without competition from the likes of AOL or MSN.
The national ISPs loom large on the competitive landscape for local ISPs, however. National ISPs have large marketing budgets, special offers, and may have preferential access to high-speed Internet access options from cable or DSL providers.
IDC's recently released Small ISPs: A Whole Different Animal (#27428) and Small ISP Profiles (#27519) examine the future of small ISPs. The landscape for ISPs in the United States is a mix of large, national and small, local providers. IDC believes that local ISPs have a place in the market and will not die off as an independent provider. Despite the predictions of consolidation into a few huge ISPs, the ISP landscape will remain pockmarked with thousands of small providers competing with their national brethren.
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