Internet Growth With Lagging Revenue Foreseen

SAN FRANCISCO, Calif., July 22 -- North American Internet traffic is on track to grow 85 percent in 2002, but revenue growth continues to lag, remaining flat for the year due to pricing pressures, slow rollout of differentiated IP services and sluggish consolidation, according to RHK's quarterly market update report.

"The major impediment to more rapid revenue growth is strong downward price pressure for Internet services," said Shing Yin, Senior Analyst for RHK's Network Traffic & Revenue Analysis program. However, industry revenue-per-bit will decline by 46 percent in 2002, RHK said. Price reductions, better utilization of higher-bandwidth pipes by enterprise customers and declines in wholesale dial-up business as users migrate to broadband access are all influencing the market, according to the report; as a result, revenues will remain flat quarter-over-quarter, totaling $15.7 billion for the year.

AT&T and WorldCom are tied for number one in North American traffic, said RHK, which expects AT&T to emerge as the clear leader in the next month or two as a result of its significantly higher growth rate. WorldCom leads in revenues for Internet services (excluding hosting and other value-added services) and is expected to remain the revenue leader through the year. "Any impact on WorldCom's network and customers due to its current troubles will take months to play out," Yin said.