Internet Service Providers

The US Internet services provider industry includes about 4,000 companies that generate combined annual revenue of $30 billion. Large companies include AOL, AT&T, Comcast, Microsoft, and Verizon. The industry is highly concentrated: the 50 largest companies hold about 80 percent of the market; the four largest companies hold more than 50 percent.

The industry includes companies that provide access to the Internet, but not electronic commerce companies such as Amazon and eBay that sell products or services over the Internet.

COMPETITIVE LANDSCAPE

Demand is driven by consumer and business demands for information. The profitability of individual companies depends heavily on efficient operations and good marketing, as most costs are fixed. Big ISPs have large economies of scale in operations, purchasing, and marketing. Small companies can compete successfully by serving small markets or providing technical expertise to customers.

PRODUCTS, OPERATIONS & TECHNOLOGY

Major products are Internet access, website design and hosting, and technical support services. Internet access accounts for about 60 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 Web design and technical services involve designing and constructing websites, and consulting on various communications and operations issues. Some Internet access companies provide content services, like ...