Emerging Industry Overview: Internet Service Providers

Industry Snapshot

U.S. Internet services continue to migrate toward high-speed options and premium services in an industry that has consolidated sometimes in surprising ways. In the consumer market, basic Internet access has grown rapidly into a commodity service. As a result, the industry is maturing rapidly even as its customer base continues to swell. Intense price pressures, heavy infrastructure spending, and changing competitive dynamics are forcing many Internet service providers (ISPs) to merge, dragging the total count of ISPs down.

To differentiate themselves and to mine for new revenue streams, ISPs of all stripes are looking for new value they can bring to customers beyond getting them connected and delivering their e-mail. Because they're usually less pedestrian than basic access service, value-added services can offer greater opportunities for profit. Different approaches include offering Internet telephone service through Voice Over Internet Protocol (VoIP), unified messaging (receiving voice, fax, and e-mail messages all from one source), instant messaging (text-based chats with others online), online security software and software applications for rent, and unique content by partnering with media and entertainment outlets.