Monday, December 18, 2006

Internet service providers

The nation's Internet service providers (ISP), excluding cable and wireless Internet access providers, grew more profitable in 2005.

According to new data from the Survey of Internet Service Providers for 2005, earned operating revenues for the industry amounted to $1.9 billion, up 9% from 2004.

As well, the industry's operating profit margin was 19%, up from 17% in the previous year. Much of this improvement was due to the strong performance of the industry's largest firms.

The ISP industry is highly concentrated, with the largest 20 firms accounting for nearly 90% of the industry's total operating revenues. This segment, enjoying economies of scale, was significantly more profitable than the rest of the industry.

Revenues from the residential subscribers (households) constituted $6 out of every $10 earned by the industry, double the proportion generated from business sector clients. Governments and public institutions accounted for less than one-tenth of the industry's revenues.

Revenues earned from the provision of Internet access accounted for 77% of total operating revenues, compared to 80% in the previous year. This proportion has been declining in recent years as the industry generates more revenues from related activities, such as the sale of online advertising space, and consulting services.

Consumers continued their rapid shift from narrowband (dial-up) to broadband (high-speed) services. In 2005, three-quarters (76%) of Internet access revenues were generated from the provision of broadband access, compared with 70% in 2004 and 60% in 2003. Internet access revenues from narrowband services matched those from broadband as recently as 2002.

The dominance of broadband connectivity becomes more evident when taking into account that this survey does not include Internet access provided through cable and wireless services, all of which fall under the broadband category.

According to data from the Canadian Internet Use Survey, released in The Daily on August 15, 2006, about half of those who accessed the Internet at home in 2005 did so using a cable connection. Only 18% of all home users of Internet did not use a high-speed connection.

Industry operating expenses increased 6% to $1.5 billion. Salaries, wages and benefits accounted for 29% of operating expenses, while telecommunications expenses, including leased line charges from upstream providers, accounted for 27%.

Note: The Survey of Internet Service Providers covers firms classified to 518111 (Internet Service Providers), in the North American Industry Classification System (NAICS). It excludes firms coded to wireless telecommunications carriers (NAICS 5172) and cable and other program distribution industry (NAICS 5175). Additionally, some firms in the telecommunications industry that, despite offering Internet access services do not have distinct establishments related to their ISP activity are not covered by this survey.

Available on CANSIM: table 354-0006.

Definitions, data sources and methods: survey number 4303.

Results from the 2005 Annual Survey of Internet Service Providers and Related Services are now available for Canada. Included are summary statistics for operating revenue, operating expenses, salaries and benefits, number of firms and number of employees. Also available are data for revenues earned by type of service provided and data for detailed operating expense items.

To order a copy of the data release package, contact Denyse Brazeau (613-951-5634; fax: 613-951-6696; denyse.brazeau@statcan.ca), Service Industries Division.

For more information, or to enquire about the concepts, methods or data quality of this release, contact Kyoomars Haghandish (613-951-6304; fax 613-951-6696; kyoomars.haghandish@statcan.ca) or Conrad Ogrodnik (613-951-3496; fax 613-951-6696; conrad.ogrodnik@statcan.ca), Service Industries Division.

---

Send this article to another person
E-mail to:
Your name:
Your e-mail: