OTTAWA – While profits grow for many ISPs, the days of dial-up Internet appear to be numbered, says a report from Statistics Canada.
Consumers continued their rapid shift to broadband with three-quarters (76%) of 2005 Internet access revenues 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. Figures from 2005 are Statscan’s latest.
The nation’s Internet service providers (ISP) grew more profitable in 2005, according to the Survey of Internet Service Providers (which, oddly, doesn’t include cable and wireless), earning operating revenues of $1.9 billion, up 9% from 2004.
"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," says the report.
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, said the report.
The ISP industry is highly concentrated, already, 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, added the report.
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.
According to data from the Canadian Internet Use Survey, released in August 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%.
