Growth in Internet usage in the coming years is likely to be led by higher PC penetration and access through the cable TV route, according to rating agency ICRA.

Value added services including Internet data centres, IP telephony are expected to become key revenue generators for Internet service providers while broadband is likely to experience faster growth as a mode of Internet access, ICRA said.

ISPs will increasingly look at other viable business models and value added service to generate revenues, it added.

The current growth in the Internet market can be attributed to declining PC prices and the drop in access rates while bandwidth usage is poised to increase as prices come down, it said, while adding the proposed setting up of Internet exchanges would improve the operating efficiencies of ISPs.

The growth of ISP sector coupled with increased bandwidth is likely to result in a sharp increase in data traffic and the demand for value added services like web hosting, unified messaging, VPNs and a slew of broadband applications.

On the downside, the ICRA report said for most ISPs, the cost of providing service is still higher than the price they are able to charge from the customer and they do not have any special access to telecom networks for the introduction of new types and classes of services.

The clearance procedures for facilities like international gateways are long and for wireless based Internet services, spectrum usage is still not possible due to cumbersome processes and prevailing fee structure.