U.S. Internet traffic surges, but revenues jump just 17%

Aug. 1, 2002

Monthly Internet traffic in the United States has reached about 100 petabytes, more than twice the volume of the entire nation's long-distance calls. While Internet traffic grew at an annual rate of 100% in 2001, that represents a drop from 130% in 2000 and 160% in 1999 and an ongoing increase in the absolute volumes that backbone providers must accommodate, details a new research report from RHK (San Francisco).

RHK reports dramatic consolidation of Internet traffic among the largest carriers, as bankruptcies continue to cripple smaller service providers. The report also addresses the difficulty many service providers are facing as revenue growth drops well behind the traffic surge, at just 17% in 2001. Revenues per bit dropped 45% in 2001, the result of intense price pressure, better utilization of higher-bandwidth pipes by enterprise customers, and a decline in the wholesale dial-up business as users migrate to broadband access.

"Although traffic growth is strong, it is growing at a less extreme pace than in earlier years, suggesting the Internet is following the usual curve for any maturing market," reasons Muayyad Al-Chalabi, director of RHK's Executive Strategic Partnership program. "The boom and bust of the dot-com era generated myths and unattainable expectations. It is important to have a realistic understanding of growth patterns, as they provide the best indication of the size of tomorrow's networks," he adds.

The gap between Internet traffic and revenue growth need not be a cause for concern, says Al-Chalabi; networks can offer increasingly efficient performance to counteract falling revenue per megabyte.

For more information on the report, "Internet Traffic Soars, While Revenues Glide," call 650-737-9600 or visit www.rhk.com.