Internet market still in hands of major ISPs, Industry Canada study reveals

The Internet market in Canada is broadly-based, but the vast majority of revenues is going to a select few service providers. That is the major finding of a report prepared for Industry Canada by a Toronto-based polling firm. Pollara Inc. interviewed 277 senior executives of ISPs last December to assemble the information contained in the Industry Framework of Internet Service Providers study. While the report found an estimated 940 ISPs operating in this country, most were small operations. Slightly more than 60 per cent of them reported revenues of under $1 million. Only 7.6 per cent made more than $3.5 million (see chart). The president of the Canadian Association of Internet Providers, which cooperated on the report, says the data confirm what his members had been telling him for years now. The situation is especially dire for the one in five ISPs that are operating at a loss. "These people are entrepreneurs, they’ve created a business," Jay Thomson tells Network Letter. "They’re going to do all they can to make their business work. Often they’ve got family involved, so it’s important to them to keep operating and to find some way to make some money. But it’s certainly increasingly difficult for them to see any growth because they just can’t compete in the high-speed residential marketplace." The primary complaint of ISP owners was the unfair competition and pricing by large ISPs (35 per cent). Other barriers to growth in the connecting sector are the inability to get access to telco and cableco networks, the cost of gaining access, and the delay in obtaining access. Financial challenges include problems obtaining financing, staff turnover, unfair regulation, and costs of serving rural areas. Technical difficulties cited include the inability to provide high-speed, the cost of equipment, and keeping up with technology and R&D.Most ISPs (86 per cent) provide services apart from Internet access. These include web hosting, ecom, and VPNs. One service that looks to increase in popularity is VoIP. The report found that 15 per cent of ISPs are currently offering this benefit, but a further eight per cent hope to start providing it within the next 18 months, raising the penetration rate to 23 per cent. One question on the survey asked ISPs that were not members of CAIP if they were interested in learning more about the lobby group. Thomson reports good feedback. "That’s been very positive" he states. "There’s been lots of interest and we’ve been following up with all of them and we hope to see some membership growth as a result."

Internet market still in hands of major ISPs, Industry Canada study reveals

News | 06/18/2002 4:00 am EDT

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