5 Million US Consumers Go Online in Q1

More than 5 million US consumers joined the online world during the first quarter of this year, an increase of 11 percent since the end of 1999, and a whopping 62 percent more than a year ago, according to TR’s Online Census compiled by Telecommunications Reports International (TRI).

According to the report, the nation’s largest ISPs now reach nearly 50.3 million customers, including those who access the Internet via television, DSL, and cable modems.

“From rebates to free Internet access, this last quarter was marked by aggressive promotions on the part of ISPs that want to capture greater market share,” said Amy Fickling, managing editor for Telecommunications Reports. “The increased availability of high-speed services via cable modem and DSL also has enticed additional consumers to get online.”

The most popular Internet access method remains dial-up ISP, which now accounts for nearly 46.7 million customers, the 10 percent growth rate in that segment during the first quarter was modest compared to growth in the emerging high-speed access marketplace. For example, the Online Census reports access via cable modems increased by 44 percent while subscriptions to DSL service soared 183 percent. Both cable and DSL have a lot of ground to catch up with ISPs: cable modem providers captured just 2.3 million customers and DSL is getting its feet wet with under 200,000 customers. Access via Internet TV saw a slight decline in subscribers to just over 1.1 million.

Online Growth by Access Technology
Service Number of
Q1 2000
Dial-up ISP 46,695,000 10%
Cable Modems 2,277,550 44%
Internet TV 1,115,300 -0.2%
DSL 189,500 183%
Total 50,277,350 11%
Source: TR’s Online Census, TRI

Heated competition, mergers and acquisitions, and alternative business models have continued to have an impact on the top-tier ISP marketplace during the first quarter of this year. TR’s Online Census found that while America Online’s dominance remains intact, NetZero jumped into the number-two spot, thanks in part to an aggressive advertising campaign for its free service. EarthLink climbed to the number three spot after merging with MindSpring. According to the report, the six largest ISPs now account for 73 percent of the total online audience. These ISPs are America Online, NetZero, EarthLink, CompuServe, MSN Internet Access, and AT&T WorldNet.

“Free access service providers continue to give traditional fee-based dial-up ISPs a run for their money,” said Fickling, adding that some fee-based ISPs are responding with rebate offers in an attempt to keep their customers. In addition to NetZero, other free-access providers emerging as strong competitors include Juno Online, which registered 2 million free Web-enabled subscribers during the first 15 weeks after launching its service in December 1999. Also, 1stUp.com Corp., which has entered into a number of reseller arrangements — most recent among them Excite@Home FreeLane, AltaVista, Lycos, and GTE — emerged as a stronger force.

CompuServe, MSN Internet Access, and Prodigy were among the traditional ISPs offering rebates during the first quarter to attract subscribers. Such rebate offers typically provide PC buyers with a $400 rebate for signing up for three years of online service with an ISP.

“As more customers turn to high-speed access, the dial-up ISP market may see significant changes in its demographics and services as premium customers and features move to the high-speed platforms,” Fickling said.

Adoption of cable modem access was strong during the first quarter, with 2.8 million subscribers now signed up — more than triple the number of subscribers just a year ago, according to the report. Leading the cable modem market are At Home, followed by Road Runner, which in total accounted for nearly 98 percent of the overall cable modem market.

The DSL market saw 183 percent growth in the first quarter of 2000. According to the report, much of this growth is attributable to the aggressive deployment and promotion of DSL by the Bell companies. The top three DSL providers are now SBC, US West, and GTE.

The report found Internet TV providers to be the only providers that saw their subscriber base decline during the first quarter, although it was only by 0.2 percent. Microsoft’s WebTV is the undisputed leader in this market, with more than 98 percent of the subscribers, according to the report.

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