RealTime IT News

Research Firm Predicts Growth for ISPs

Market research firm Yankee Group is predicting that nearly two-thirds of U.S. households will be online by the end of 2003.

The company estimates 25 percent of U.S. homes currently access the Internet. That is expected to grow to one-third of American homes by the end of this year and two-thirds of households by 2003.

The 29-year-old research firm estimates that U.S. consumers will spend $56 billion on Internet access services over the next five years. During the same period of time, The Yankee Group forecasts the online services market will grow at a compounded annual rate of 21 percent.

The Yankee Group contends that plummeting computer prices and online access affordability will drive the increased household adoption and usage of the Internet.

A recent survey by the firm found that 46 percent of US households with PCs cited the Internet access as the primary use for their computers.

America Online dominates US consumer online services with a reported 57 percent market share. The anticipated growth of the Internet access market leaves plenty of opportunity for ISPs to claim the number two spot.

Microsoft Network is currently second with 6 percent of the market; AT&T WorldNet is third with 5 percent market share.

The competition to round-out the top 5 ISPs by subscriber base in the U.S. is currently a dead heat between EarthLink and MindSpring, according to Yankee Group.

The research firm believes that best strategy for growing market share is to target new users.

"Any company serious about obtaining double-digit market share must focus on the newbie market; the 75 percent of households who have yet to get on-line," says Emily Meehan, analyst in the Yankee Group's Internet Market Strategies practice area.

"While this will require an enormous investment in marketing to generate brand awareness, the only other growth strategies are to steal current AOL customers, and/or acquire locally dominant ISPs to generate a greater presence in a particular geographic location."