ISPs In Western Europe - second edition - part 4

Market Outlook

Within the residential sector, the main sources of revenue for ISPs are shifting entirely away from access provision towards advertising, ecommerce transactions and paid-for content offerings. Few ISPs have anticipated the speed and the depth of the price cuts that have occurred within many of Western Europe's residential markets over the past 18 months.

The emergence of offerings such as BT's SurfTime marks a sea change in the evolution of the dial-up sector. They simultaneously pose a challenge to current pricing models and market structure, and constitute the first real move away from the traditional interconnect models originally established for switched telephony services. The likely effect will be to intensify competition further within what is already a highly competitive market, decreasing revenues from access provision and possibly pushing margins below cost as providers fight to retain market share.

As a result of these developments in the residential sector, the business sector will become a key area for ISPs that do not possess the requisite skills to compete against the consumer-focused organisations, with the ASP market forming the main area in which ISPs will seek to achieve this. Most of the major international network operators are now positioning themselves to enter the ASP market, or at least considering how to do so.

Over the next two or three years, entry barriers are likely to rise rapidly as companies firmly establish their brands, deepen their skills bases and market knowledge, and lock their customers in through offering highly differentiated and integrated solutions. As a result, no business-focused ISP can afford to be without a vision of what role it intends to play in the market—or to delay its market entry. ISPs that do not act now may soon find that the current window of opportunity has closed.

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