Internet service provider industry

Canadian Internet service providers turned a profit in 2003 for the first time since 1999. Operating revenues increased 8% to $1.6 billion. This rate of growth was strong but significantly less than the gains of 13% in 2002 and 27% in 2001.

After a period of surging increases in operating expenses in the late 1990's, Internet service providers managed to reduce their expenses for a second consecutive year in 2003. Total operating expenses dropped by 13% to $1.3 billion. This was a significant change from the roughly 35% jump in operating expenses recorded between 2000 and 2001.

Telecommunications expenses (including leased line charges from upstream providers) remained the single largest expense item, comprising 31% of total industry operating expenses. Salaries, wages and benefits accounted for another 27%. In dollar terms, telecommunications expenses fell 19% compared with 2002 and salaries, wages and benefits dropped by 10%.

The continuation of increased revenues and declining expenses allowed Internet service providers to go from a loss of 5 cents for every dollar earned in 2002, to a profit of 16 cents for every dollar earned in 2003.

The majority of industry revenues (74%) came from the provision of Internet access services. The two most common access services were broadband or "high speed access" and narrowband, commonly referred to as "dial-up access." Broadband access accounted for 41% of industry revenues compared with 30% for narrowband.

Internet service providers continued to diversify their services in 2003, with eight out of every nine surveyed firms reporting revenues from services other than Internet access. Those included activities such as Web site hosting and design.

Note: This survey covers firms that generate the majority of their revenues from Internet access. It does not include firms coded to the cable and other program distribution industry (North American Industry Classification System 517510).

Available on CANSIM: table 354-0006.

Definitions, data sources and methods: survey number 4303.

Results from the 2003 Annual Survey of Internet Service Providers and Related Services are now available for Canada. Included are summary statistics for operating revenue, operating expenses, salaries and benefits, number of firms and number of employees. Also available are data for revenues earned by type of service provided and data for detailed operating expense items.

For more information, or to enquire about the concepts, methods or data quality of this release, contact Conrad Ogrodnik (613-951-3496; conrad.ogrodnik@statcan.gc.ca; fax: 613-951-6696), Service Industries Division.