The total Internet users are more than 3 Million and there are 250 ISPs operating in this area. It means that 250 ISPs are sharing the total market of Rs. 10 billion per annum. The market is very small and players are many and number of users are not increasing as fast as mobile phone users because of conservative growth of fixed line density in cities. So for ISPs, the only way left is to snatch customers from other ISPs by reducing prices. This decrease of revenue may cause death to the ISPs, because by continuously reducing prices, ISPs can not create high demand as required and this will reduce the profitability in the long run and finally this may cause death of business. ISP market has reached to 12% of the total Pakistan’s telecommunication market as per PTA report. ISP market is the third bigger market after fixed line and wireless market segments. Internet market growth is highly related to teledensity. Fixed line density at present is 3.33 lines per 100 persons and aggregate density (fixed, WLL and mobile) has been predicted to rise to 15% in 2010. From this growth, one can estimate that internet will have high growth in future but it is only possible for ISPs to fetch the market share if they have all kinds of media for internet access (fixed line and wireless).

There is a tough competition and customers are now much aware of the prices and have more choices. ISPs have decreased the prices to a level where it has become difficult to maintain quality and now users have started saying that all ISPs are same as in the case of mobile communication services. No body looked satisfied from one company. Now the trend is to keep multiple internet connections from different ISPs.

The Internet access through fixed line media only, may not have much faster growth in future because the wireless and mobile teledensity is three times the density of fixed line and wireless (WLL and cellular) growth is very fast and high growth is expected in future also. So the companies totally depending upon fixed line media access my not feel comfortable in terms of revenue and they will face pressure to extend the line of services or diversify.

One of my friends is head of LDI operations in one of the newly entered cellular company. I asked him why they did not launch telephone cards. He said that Pakistan is really a different market. In this market, do not think of earning through quality but think of earning through increase of users by continuous price cutting strategies. This is continuous phenomena and quality conscious companies always face pressure to sustain in this highly price conscious market.

To sustain in highly competitive environment, ISPs have changed their services portfolios. Some have added new high speed services like ISDN, DSL and Wireless Internet Services in their services portfolio and have made their position strong by offering variety of internet access to different market segments varying from low speed to high speed. Some have added in their services portfolio the telephony services through phone cards and some have added software development services and some have added corporate communication solution services. It has become difficult for ISPs to sustain only on the basis of Internet services without adding value added services like web hosting, domain name registration, e-commerce, web development etc. or adding new line of services like telephony, VOIP and WLL services.

The key to success for ISPs is to diversify by adding communication services like Local Loop, WLL and wireless Internet services. ISPs coupled with telecommunication companies will have better prospects and survival than the ISPs providing only Internet services through fixed line media.