ISP giants to keep smaller rivals at bay

Although the market for Internet service providers is expanding rapidly, it will continue to be dominated by the largest players, such as America Online and MSN, according to a new study.

The market at large is expected to grow by 36 percent this year, according to a report released today by Cahners In-Stat Group, a market research firm.

Yet even though the number of regional and rural service providers will increase, Cahners said the 20 percent of ISPs that provide service nationwide will capture 80 percent of total market revenue.

The research firm believes major U.S.-based ISPs, such as AOL, MSN Internet Access, Earthlink and Juno Online Services, among others, will continue to dominate the market. Growth will stem from selling wholesale capacity on their networks to smaller ISPs, researchers added.

The Net service provider industry, which is projected to grow to 7,785 providers from 5,775 last year, is expected to produce $32.5 billion in revenue in 2000, according to the study.

ISPs generated revenue of $23.7 billion last year. To increase sales, many companies are increasingly delving into Web hosting, high-speed or "broadband" services and other higher profit-margin businesses.

Web hosting now represents nearly 30 percent of business ISP revenue, the study found.