More Than 16 Million High-Speed Homes by 2004

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The US market for residential high-speed Internet (HSI) services will grow to 3.3 million subscribers in 2000, and will reach 16.6 million subscribers by 2004, according to a report by The Yankee Group.

The report, "Cable Modems and DSL: High-Speed Growth for High Speed-Access," predicts the increase in HSI usage will be driven by cable industry consolidation and competition from local telephone companies. The report also said the installed base of domestic HSI subscribers stood at 1.4 million at the end of 1999, with nearly 80 percent of these homes using cable modems for access. But while the cable industry will continue to lead the market over the next five years, the Yankee Group predicts its share of the total installed base of HSI subscribers will shrink to about 42 percent by the end of 2004, as local telcos make DSL services more widely available.

Recent consolidation among large and mid- sized cable system operators will speed deployment of cable modem services, according to Bruce Leichtman, director of the Yankee Group's Media & Entertainment Strategies practice.

"Prior to consolidation, the high cost of upgrading to two-way, cable-modem-capable infrastructure meant that smaller operators would be hard-pressed to make the transition quickly," Leichtman said. "Today, however, many of these operators are now owned by deeper-pocketed buyers like Paul Allen's Charter Communications, Adelphia, Cox, and Comcast. And the tremendous sums these companies paid have only heightened the importance of making the upgrades needed to add lucrative incremental services as soon as possible."

On the DSL side, Leichtman said wider deployment and more consumer-friendly pricing options will make the telco-delivered technology more widely accepted in the next few years. According to consumer data gathered for the report, among consumers who were interested in receiving high-speed access, 30 percent said they would prefer to receive the service from their telephone company, while 20 percent favored their cable provider. The remaining 50 percent said they still had no preference.

Other findings from the Yankee Group report include:

• About 41 percent of all US households will have access to cable modem service by the end of this year. Access to DSL will be more limited, with only 24 percent of homes gaining access by year's end
• Nearly two-thirds of all PC-owning households today said they would be interested in using some type of HSI service, and 40 percent of those who were interested would be willing to pay $40 per month.
• Households that have been online for three years or more were nearly twice as willing to pay for high-speed access as those online for less than one year.

A report by Allied Business Intelligence (ABI) has predicted the slow deployment of high-speed Internet access will lead some consumers to wireless broadband services. ABI predicts there will be more than 9 million subscribers to wireless broadband services by 2005.