One-in-three UK ISPs will go bankrupt

The figures come from a survey by messaging consultancy Outrade.com, which asked 45 UK ISPs a variety of questions about their businesses. In response, the industry said 40 would fail and 17 would be sold within the next year and a half. There are about 125 ISPs in the UK.

Outrade.com's UK MD Keith Bellamy said: "There is mounting gloom in the ISP industry at present. Unfortunately for many of these companies forged in the dot-com boom days, they are now suffering a severe dose of reality."

The ISPs will suffer from insufficient funds, poor management and the problems of offering unmetered access.

In addition, one third of the companies polled felt their industry cohorts didn't know what the business would be like in two years.

The figures come out on the same day that another survey from ebusiness consultancy Visual Insights slams ISPs for failing to inspire customer loyalty through extra services.

Analysts agree the findings are broadly in line with their view of the market. Fraser Pearce, research director at analyst house Forrester Research, said only ISPs that are heavily linked with a telecoms or networks infrastructure business will survive. He added: "90-95 per cent of virtual ISPs, which don't have the chance to bundle their services in with other telecoms services, will eventually die."

Virtual ISPs are ISPs that don't own their telecoms infrastructure, but rent this from others, focusing themselves on providing content. During the dot-com boom many such ISPs set up offering free subscriptions, hoping to make their investment back by getting a share of telecoms charges and advertising revenues.

However, now both advertising and telecoms revenues are drying up, many ISPs find themselves without much money coming in. Outrade MD Bellamy added: "Only the bigger ISPs and those that are also telcos will last, and we'll see more consolidation."