Study: ISP Competition Intensifies

Competition for online subscribers is heating up. Presently, five
hard-hitting ISPs are doing battle to capture the Number Two slot for online
subscribers and consumer mind share.

Looking to come in behind market leader America Online are EarthLink, MSN, Juno,
Prodigy and NetZero.com, according to a technology
research firm.

“There has been a great deal of activity in the Internet service provider
space within the last eight to 12 months, both in terms of merger and
acquisition activities and the mainstream emergence of the free service
model,” said Rob Lancaster, an analyst in The Yankee Group’s Internet market
strategies planning service.

“In addition to the shakeout, we have seen and heard an extraordinary
amount of hype and posturing regarding subscriber totals,” he added. “This
is an indication that many of the smaller and mid-sized ISPs hear giant
footsteps and are puffing their feathers in an attempt to ward-off
assailants.”

The Yankee Group recently completed a study on the state of the ISP
market, focusing on marketing strategies regarding subscriber churn,
acquisition and retention.

The company additionally studied the current period of consolidation that
the service provider arena is experiencing; the access options that are
offered to consumers, including free, fee-based and broadband; and the
providers serving the growing private label space.

According to the research:

In the fee-based space, there has been little movement in the top
five, as dial-up Internet access becomes a commodity and the market for this
service begins to plateau. Future movers in this category are most likely to
be ISPs that have strong broadband offerings, such as @home, AT&T, Prodigy and AOL-Time Warner (pending the
close of the merger).

In the free ISP market, Juno holds the top spot with more than 2.1
million active subscribers. Well-financed newcomers BlueLight and NetZero are not far
behind, with FreeInternet.com and
Altavista rounding out the top five.

An in-depth analysis will be soon released in a Yankee Group Report on the
state of the ISP space.

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