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| GartnerGroup's Dataquest Outlines Evolving Internet Threats and Opportunities for ISPs and Traditional Retailers | |||
| "Free-to-User" Mentality Is Changing Consumer Expectations | |||
| Stamford, Conn., October 26, 1999 – Internet service provider (ISP) subscription fees from U.S. households is currently running at the rate of $7 billion per year, but as the Internet continues to evolve, ISPs must examine other revenue-generating opportunities to remain competitive, according to Dataquest Inc., a unit of Gartner Group, Inc. (NYSE: IT). Dataquest analysts said there are two emerging trends that threaten ISPs income streams. | |||
| "A serious issue for ISPs to consider is the rapid decline in the growth rate at which new households will become subscribers," said Dr. Harry Hoyle, vice president for Dataquest's e-Home: Telecom and Online Services U.S. program. "This alone will result in the lower growth rate of consumer expenditure on home PC-based Internet access from 39 percent annually from 1996 to the middle of 1999, to a projected 8 percent annual growth through 2001." | |||
| The second issue for ISPs to address is the expanding "free-to-user" mentality. Dataquest analysts said more U.S. consumers will expect free Internet access in the future. | |||
| "Free Internet access at conventional modem speeds is already offered by e-mail-only services, as well as some smaller ISPs," said Dr. Hoyle. "While it's unlikely that U.S. households will migrate en masse to free access providers, the growth in households with free Internet access will accelerate due to the intense competition for the remaining new subscribers and the need to retain existing subscribers." | |||
| Dataquest analysts suggest U.S. companies examine how European ISPs are handling the free-access issue in the region. The key ingredient for companies in the region has been to find ways to drastically reduce the cost of customer acquisition. This is being accomplished through ISP relationships with major bricks-and-mortar brands such as banks and retailers. In some instances, this is simply a case of merchants outsourcing to their ISPs, but others are co-branded ventures, such as Woolworths (Kingfisher) with AOL's new Netscape Online service in the United Kingdom. | |||
| "These new relationships offer established bricks-and-mortar retailers an opportunity to quickly launch a presence on the Internet," said Dr. Hoyle. "Conversely, it offers ISPs a way of enriching their sites to attract more transaction income that will replace the revenue lost from Internet access subscriptions." | |||
| This information is produced by Dataquest's e-Home: Telecom and Online Services U.S. program. This program, one of more than 30 targeted specifically to the e-business space, offers extensive coverage on e-commerce and portal use in homes and in the workplace. It quantifies revenue opportunities and reviews business models to critically assess the options available to companies in the digital economy. More information on this program, and other Dataquest e-business programs are available on Dataquest's Web site at http://www.dataquest.com/dq/static/offer/inteco_products.html. | |||
| To subscribe to this program or other consumer Internet-related programs, please call 203-316-3107. To subscribe to other Dataquest programs, please call 800-419-DATA, or 408-468-8009. More information about Dataquest's programs, descriptions of recent research reports, and full text of press releases can be found on the Internet at www.dataquest.com. | |||
| GartnerGroup's Dataquest is the recognized leader in providing the high-technology and financial communities with market intelligence for the semiconductor, computer systems and peripherals, communications, document management, software, and services sectors of the global information technology industry. | |||
| As the world's leading authority on IT, GartnerGroup provides clients with a wide range of products and services in the areas of IT advisory services, measurement, research, decision support, analysis, and consulting. Founded in 1979, with headquarters in Stamford, Conn., GartnerGroup is at the center of a global community serving Fortune 1000 clients from 80 locations worldwide. Additional information about the company is available on the Internet at www.gartner.com. | |||
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