ISPs (Internet service providers) in the Asia-Pacific region (excluding Japan) need to diversify their business strategies because simply offering free Internet access in this competitive market no longer represents a viable business model, according to a report released Tuesday by market analyst International Data Corp. (IDC).
Revenue generated from online advertising and B2C (business-to-consumer) transactions have been unexpectedly low resulting in several ISPs moving on from the free Internet access business model, according to IDC.
ISPs are faced with the task of diversifying their business strategies and moving up the value chain, the market research company said. They now need to provide value-added services such as Web hosting, collocation, Internet telephony, unified messaging, managed hosting, server management, network consulting, VPN (virtual private network) and security services. This is especially important in countries with high Internet penetration rates like Australia, Hong Kong and Singapore, IDC said.
Strategies developed by ISPs include:
– partnerships with content providers and ASPs (application service providers) to provide a broader range of services and therefore increase revenue streams;
– rapid acceleration of broadband access services with ADSL (asymmetric digital subscriber line) and cable modem services commercially launched last year in countries like Taiwan, Korea, China, India, Singapore and Hong Kong; and
– offering broadband services such as video conferencing, online gaming, Web-based shopping and banking services. Government efforts to develop knowledge-based economies, to promote the usage of ICT (info-communication technologies) and to build national information infrastructures have reinforced such trends.
In 1999, the Asia-Pacific ISP market was valued at about US$6.1 billion and is set to boom. IDC forecasts that the revenue will more than triple to $22.0 billion by 2004, representing a CAGR (compound annual growth rate) of 29 per cent. Broadband access revenue generated for 1999 will total $320 million and is projected to increase at a CAGR of 84 per cent to $6.7 billion by 2004, according to IDC.
Value-added services formed about seven per cent of total Internet revenue during 1999, and are expected to grow to about 23 per cent of the total Net revenue by 2004, IDC said.
IDC is a subsidiary of International Data Group Inc., the parent company of IDG News Service.
IDC Asia-Pacific, in Singapore, can be reached at http://www.idc.com.sg/.