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Certain Applications Could Lead Consumers to Broadband

  |  February 13, 2002   |  Comments

It's been said that broadband has to be sold to consumers based on its applications, not its speed. A survey by Sage Research examined which high-speed applications will get consumers to pay.

A survey conducted by Sage Research and commissioned by Cisco Systems found that when it comes to broadband services, consumers are most likely to pay for those used for entertainment, communication and education.

The study found that 44 percent of U.S. households are willing to pay for entertainment services, 42 percent for communications services and 39 percent for education services. Entertainment services include simulation games, kids' activity sites, TV show simulations, music libraries, online gambling, TV shows on demand, movies on demand, concerts and cultural events. Communications services include videoconferencing, unified messaging for personal purposes and international long distance/telephone. Education services include language education, music education, cooking education, continuing education and multimedia encyclopedias.

"While our hypothesis going into the research was that we would find demand for a variety of entertainment, education, and communications-related services, even we were astounded by how many households reported willingness to pay," said Kathryn Korostoff, president of Sage Research.

When U.S. households were asked to report how much -- if anything -- they would be willing to pay for a wide variety of broadband-delivered services (such as long distance telephony, unified messaging, continuing education and movies on demand), many reported interest in more than one type of service. The research also shows that many of the services with broadest appeal are those most likely to have a high degree of multimedia content. For example, 15 percent of U.S. households would pay for continuing education. Delivered over the Internet, continuing education would typically include video (for example, lectures) and even application sharing (for example, to simulate a classroom or study group environment).

To enjoy applications such as e-learning, videos-on-demand and video conferencing, consumers will need a broadband connection of 1.5 Mbs or faster, said Laura Ipsen, Cisco's vice president, worldwide government affairs. Most U.S. households with broadband have 256-Kbps connections.

The study found that the most common price consumers are willing to pay for an Internet-delivered unified messaging service is $10 per month. As another example, the most common price consumers are willing to pay for Internet-delivered movies on demand is $5 per movie.

"The amount people are willing to pay for Internet-delivered services is really quite reasonable in most cases," Korostoff said. "That said, for some services, the amount they are willing to pay is less than for non-Internet alternatives." For example, the amount most are willing to spend per college credit for an online continuing education class is $50 -- far less than what they would pay at a conventional college.

This poses a challenge for providers to build a sustainable business model. According to the study, some services would need to be provided on a volume basis. Since most of these services, such as continuing education, require broadband access for a satisfactory customer experience, building such a volume will be difficult. Until broadband access is widely available to U.S. households, the number of potential customers for these services will be limited.

Once consumers take to broadband access, the results are encouraging. A study by Leichtman Research Group Inc. and sponsored by the Broadband Content Delivery Forum found that 40 percent of households are interested in subscribing to high-speed Internet access, and current broadband users spend 40 percent more time online than those with dial-up connections. More than 20 percent of individuals with high-speed access have rated their satisfaction with their service a 10, the study found, compared to just over 10 percent of those with dial-up.

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