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February 03, 2011

Market Challenges Faced by ISPs

By Jamie Epstein, TMCnet Web Editor


On a daily basis, the demand for Internet access continues to spread around the world. Just supplying Internet service, however, even in areas that previously never had access, does not guarantee successful results in the long- term. As the customer base increases, the challenges facing ISPs begin to make their way into the forefront.

Competition between larger and smaller providers is a huge issue currently facing ISPs. Smaller ISPs are charged for things such as peering arrangements and operating network access points (NAPs), while larger national ISPs, such as America Online, are able to work out better terms with infrastructure providers, according to a website. According to analysts, the result of this inequality is less competition in the ISP market, and higher barriers being set for breaking into the ISP market. Because of this, users have fewer options to choose from.

 According to the Encyclopedia of Ecommerce, smaller ISPs often become frustrated by a lack of connectivity to high-speed network hubs, which are owned and operated by large ISPs such as UUNET or Qwest. An estimated 30 percent of total Internet traffic travel over UUNET's network. UUNET, Sprint, Cable & Wireless (News - Alert), AT&T, and GTE combined dominate about 80 percent of the total long-distance Internet traffic. If a local or regional ISP cannot connect to a high-speed hub, its Internet traffic slows considerably. While smaller ISPs have to pay a fee to access the larger backbone operated by the major ISPs, the backbone owners generally swap traffic among themselves at no charge under peering arrangements.

D-Link WishFi- outlined on its website various challenges that ISP providers see on a daily basis.

The fact that an ISP Portal Page is hardly ever seen poses a big challenge. Subscribers don’t often have their own ISP’s portal set as their home page. This causes great difficulty with up selling services, or cross selling related products the ISP may offer.

Internet service market price erosion challenges ISPs. ISPs work by offering different types of plans to all users. However, unique costly tools are required to generate more revenue from each subscriber, including even basic access customers.

To date, ISP’s still haven’t earned a substantial share of the Internet marketing segment, which yields extremely low penetration within online advertising. In order to overcome this challenge, ISPs must devise a creative plan that will help with tapping into advertising revenue.

 ISPs have to continue to try and increase subscriber revenue with new options for services, while keeping expenses relatively low for deploying these services, in order to enable the shortest ROI time possible.


Jamie Epstein is a TMCnet Web Editor. Previously she interned at News 12 Long Island as a reporter's assistant. After working as an administrative assistant for a year, she joined TMC (News - Alert) as a Web editor for TMCnet. Jamie grew up on the North Shore of Long Island and holds a bachelor's degree in mass communication with a concentration in broadcasting from Five Towns College. To read more of her articles, please visit her columnist page.

Edited by Jamie Epstein


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