A recent study by International Data Corp (IDC) revealed that as more ISPs entered the market in the past two years, many newcomers had resorted to giving away Internet access and other services to attract customers.
ISPs had expected huge revenues from online advertising and B2C transactions. They also cut their prices to build up their subscriber base with an eye to generating increased revenues. But their expectations have been largely unmet.
The latest casualty in Hong Kong's Internet industry was Asia Online, which on Tuesday said it was sacking 56 employees, or 18 percent, of its local staff. The company also cancelled its US$100 million Nasdaq listing plan in September.
Recently, Asia Online has started offering e-commerce Web-site design tools, online payment and security solutions, mainly to corporate customers.
The regional service provider was set up in 1994 as a pioneer Internet service provider but later ran into difficulties.
"ISPs are faced with the task of diversifying their business strategies and moving up the value chain through the provision of value-added services such as Web hosting, co-location, Internet telephony, unified messaging, managed hosting, server management, network consulting, virtual private network (VPN), security, among others," said Grace Yeo, senior analyst of IDC's Asia/Pacific telecommunications research group.
An example of emerging revenue streams were partnerships with content providers and application services providers to offer a wider range of services.
IDC also estimated that value-added services, which formed about 7 percent of total Internet revenues last year, would grow to about 23 percent by 2004.
Broadband access services via asymmetric digital subscriber lines and cable modems were also becoming attractive to ISPs, with markets such as Korea and Taiwan seeing rapid take up.
Consumer demand for high-speed Internet access, video conferencing, online gaming, and other Web-based shopping and banking services would see broadband access revenues climb to US$6.7 billion by 2004 from US$320 million last year, IDC said.
