The Internet access industry has skyrocketed in the last 18 months, with revenues growing at a rate of almost 25 percent a month, up from 3.8 percent per month in early 1996.
According to the study by Joel Maloff, an analyst with the market research firm Maloff Group International, more than 4,000 ISPs counted $8.4 billion in revenue from Net access, compared with total revenues of $1.8 billion 18 months ago.
Maloff calculated that even if industry growth slows to a manageable level, it will become a $50 billion industry by the year 2000. "This is no longer a boutique marketplace," he said.
Because of the unforeseeable nature of the growth, the outages and "brown-outs" that have plagued networks in the last several years cannot be directly laid at the feet of shortsighted ISP executives. Maloff contended that there was no way that executives at America Online and other Net services could have predicted the demand for access and designed a foolproof network scheme to handle the onslaught of traffic.
"What we have seen is a 'peak-and-valley' approach to network design. As network growth exceeded expectations, it browned out as it continued to grow," Maloff said. "It would have been almost fiscally irresponsible to forecast a network that would build to an 8 billion customer level, yet that's what occurred."
Maloff asserted, however, that ISPs will have to learn from mistakes of the past when trying to provide network reliability. "We will have a history to look back on. I think there will be fewer excuses."
Maloff pointed out that the top two companies, AOL and CompuServe, have both recently divested themselves of their networks. "Online services are the retail outlet for dial-up services," he noted. Traditional ISPs will begin to "deal more with the business side," such as hosting corporate intranets.
Although dial-up rates continue to drop, the study indicates that prices are beginning to stabilize; Maloff believes that flat-rate pricing schemes will begin to be a thing of the past. As one ISP executive told him, "Not even God can make money at $19.95 a month."