Iceland has been quick to adapt to Internet technology and has one of the world's highest levels of Internet subscriptions and service providers per capita. The market for Internet services in Iceland has grown significantly over the past couple of years. Iceland has always had higher than average Internet penetration rates, but the addition of free Internet access services has driven the rate up from 49 percent in December of 1999 to 60 percent in 2000. In addition, more than 70 percent of the population had Internet access at work, home or in school. This is an impressive number considering during the same time period, only 36% of the population in the United States and 22 percent of Finland’s population had access to the Internet from home.

History of the Internet in Iceland

Iceland connected to the global internet in 1986. This was a UUCP connection from the Marine Research Institute in Iceland to the European Unix Network (EUnet) headquarters in Amsterdam. This same year the University of Iceland connected via UUCP to the Marine Research Institute. With this connection the Icelandic network (ISnet) had email access to the Internet and became part of Usenet. Bandwidth was somewhere between 300 and 1200 bits per second. 

In 1989 proper Internet connection was established with NORDUnet. This connection used IP over X25 routed to NORDUnet in Denmark, but in 1990 the first permanent leased connection to NORDUnet central site in Stockholm was established. In march 1997 ISnet established a direct connection to North-America, to TeleGlobe in Montreal, Canada, in addition to our European connection. This line was moved to New-York in september 1999. (ISnet)
 

In addition to the availability of free Internet access, demographics appear to have an impact on the level of Internet usage as well. More than 80 percent of the citizens over age 55 have Internet access but only one-third claim to actually use the Internet. This is probably because individuals acquire access because they can get it for free, although they do not have a need for it.The highest percentage of use is seen in the 16 to 24 age group, with almost 90 percent accessing the Internet. Men are slightly more likely to have Internet access than women, 77 percent vs. 71 percent. The young, well educated, and those living near the city of Reykjavik are also more likely to be online. These groups also spend more time than average surfing the Web each week. 

Iceland had 37,974 Internet hosts in September 2000, which is an a 8 percent increase over the previous six month period. According to OECD, this number equals 120 Internet hosts per 1,000 inhabitants. Iceland has the third highest penetration in this category, behind the US and Finland.

Timeline of Internet Connections and Bandwidth in Iceland
 

Date	New Connections	Total Bandwidth
1986 - 1989	UUCP to Eunet, Amsterdam	300-1200 b/s
1989 - 1990	IP over X25 to Denmark	2400   b/s
1990 July  24	Leased line to Stockholm	9600   b/s
1992 May    7		56000   b/s
1994 May   17		128000   b/s
1995 March 13		256000   b/s
1995 Sept   1		1000000   b/s
1996 May    9		1984000   b/s
1997 March 14	Leased line to Montreal added	3960000   b/s
1997 June  23	+2M	5944000   b/s
1998 March  5	+2M	7936000   b/s
1998 Nov    6	+2M	9920000   b/s
1998 Nov   18	2M to NORDUnet added	11904000   b/s
1999 March 24	2M to Pennant Point	13888000   b/s
1999 Sept  10	45M to New York	48178000   b/s

ISPs and Internet Traffic

ISNet is the oldest and most dynamic Internet Service Provider in Iceland. The The ISnet external connection consists of a 45Mb circuit to TeleGlobe in New-York. Regular Internet traffic measurements began in 1993 and the following graph depicts the total traffic on ISnet's external Internet connections from the beginning, which serves as a good benchmark for trends in overall traffic rates in Iceland. As the graph depicts, traffic rates to Iceland are more than twice that of the traffic out of the country. The graph shows a sharp increase in traffic in the year 2000, particularly towards the end of the year when there is likely to be and influx of online shopping in Iceland.