Internet Service Providers
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Industry Overview
The US Internet service provider (ISP) industry includes about 4,000 companies that generate combined annual revenue of about $20 billion. Major companies include AOL, AT&T, Comcast, Microsoft, and Verizon. The industry is highly concentrated: the 50 largest companies generate about 80 percent of revenue; the four largest companies account for more than 50 percent.
The industry includes companies that provide access to the Internet via wired or wireless connections. Internet access operations of telecommunications carriers are included in the industry, but telecommunications companies themselves are covered in separate industry profiles. Internet publishers, broadcasters, and search portals also are covered in a separate industry profile, as are Internet-based retailers.
Competitive Landscape
Demand is driven by consumer and business requirements for information. The profitability of individual companies depends on efficient operations and good marketing. Big ISPs have economies of scale in operations, purchasing, and marketing. Small companies can compete successfully by operating in underserved markets or excelling in customer service.
Products, Operations & Technology
Major products are Internet access, website design and hosting, and technical support services. Internet access accounts for about 75 percent of industry revenue. Internet access allows individuals or companies to connect to the Internet over ordinary and special telephone lines, cable, or wireless connections (including satellite). Website hosting allows users to have an address on the Internet (a website) by maintaining files on a specialized computer called a server, while website design and technical services involve designing and constructing websites, and consulting on various communications and operations issues. Some Internet access companies provide content services, such as chat rooms, bulletin boards, and music downloads.
The Internet is a collection of computers (big mainframes or small personal computers) connected by communication lines. By making files on a computer available to others, individuals and companies can communicate with each other. Three major systems operate on the Internet: the e-mail system that allows users to send messages to each other; the file transfer system, called FTP, that allows users to exchange many types of files; and the World Wide Web (by far, the largest part of the Internet), that allows users to see special graphical files called Web pages.
Several special types of computers operate the Internet. Servers (computers with many hard-disk drives), hold most of the information, while routers (computers with rapid processing capabilities) direct information to the correct communications channel. The speed with which customers can gain access to the Internet depends on the bandwidth of their connection. People using ordinary phone lines can take information off the Internet at a speed of 56 kilobytes per second, which is called narrowband or dial-up access. DSL phone lines, cable, fiber optic, satellite, and wireless network links can accommodate speeds from 300 kilobytes per second to more than 10 megabytes per second, which is known as broadband access.
