ISPs Ready to Spend on Equipment

The global ISP equipment market will triple by 2003, when one-third of all residential users choose high-speed Internet access, according to a report by Datamonitor.

According to Datamonitor’s “Powering the Internet Revolution: 1999-2003,” the total number of residential broadband subscribers (cable modems and ADSL) reached 700,000 globally in 1998. The report also forecasts that the number of Internet accounts (95 million in 1999) will increase more than fivefold over the next five years. By 2003, Datamonitor predicts there will be nearly 545 million Internet user accounts globally, even surpassing the number of PCs installed globally.

Datamonitor’s report also predicts the total market for Internet access and value-added services (valued at $25.5 billion in 1998) will increase to $154.5 billion by 2003. The dramatic expansion in the ISP market will be driven by domestic subscriber revenues and business subscribers.

Domestic subscriber revenues will continue to increase, although at a more moderate rate. Although the price for dial-up access seems to have settled at $19.95, the emergence of broadband access devices in the home will enable a new access revenue opportunity for ISPs.

Business subscribers will continue to drive service revenue growth, according to Datamonitor. ISPs will enjoy a steady influx of revenues as Internet penetration in the workplace improves globally. There are currently more offline businesses in the world than online, the report found.

ISP Service Equipment Markets (million of dollars)
	1998	2003
Customer care tools	$160	$700
Network security tools	$190	$880
Server hardware	$830	$1.83b
Server software	$270	$1.4b
Caching engines	$190	$880
Source: Datamonitor

In addition to revenues derived from the accumulation of new business subscribers, Datamonitor found that ISPs also have the opportunity to augment existing corporate contracts with premium access levels and costly value-added services that will further drive growth.

All of this growth will spur the market for ISP service equipment to more than quadruple between 1998 and 2003, reaching a value of $6.2 billion in 2003. The total market for ISP equipment will approach $15 billion in 2003, Datamonitor found.

According to Datamonitor, key areas for growth in the service equipment markets include:

• Customer care tools: New levels of competition within the ISP market place new imperative on the effective management of customer relationships.
• Network security tools: The adoption of next generation bandwidth-intensive Internet applications can only take place if ISPs can guarantee the full security of their networks.
• Server hardware: ISPs will scale up their expenditure on server hardware in order to accommodate an expanding range of service offerings.
• Server software: As ISPs aim to roll out next-generation applications and sophisticated service offerings, spending on server software will grow more dramatically than that for any service equipment market.
• Caching engines: The result of more subscribers on the Internet and the broadening of subscribers’ bandwidth needs will be greater levels of congestion along all parts of an ISP’s network.