Broadband Hooks Up 13.1 Million

According to a new study from Jupiter Research, U.S. broadband service providers added approximately 1.3 million net new households in the second quarter of 2002. About 13.1 million households across the country currently use broadband services to connect to the Internet.

The growth of broadband uptake in the U.S. is on pace to meet Jupiter’s forecast of 15.4 million households by the end of this year. However, quarterly growth rates have fallen significantly between 2001 and 2002. Joe Laszlo, Jupiter Research lead broadband analyst, said this is due in part to price sensitivity among would-be users.

“While many providers offer discounts on the first three to six months of service, this may not overcome consumer sticker shock,” Laszlo said. “Consumer DSL offerings grew by 10 percent in the second quarter of 2002, while the cable modem audience grew by 12 percent from a much larger subscriber base. Higher average prices for DSL than for cable largely explain this difference.”

Laszlo cautioned that broadband service providers would need to broaden their marketing efforts and focus on new audience segments in order to make substantial subscriber gains in 2003.

“Cresting 20 percent of the online audience creates another worry for broadband service providers,” Laszlo said. “Most classic early adopters have broadband at this point, and new strategies and messages will likely be required to entice increasingly mainstream dial-up users to broadband.”

In its new report, Broadband User Segmentation: Understanding and Targeting the Broadband Audience, Jupiter Research suggests that companies pursuing new broadband users must start considering specific segments within the audience, not the audience as a whole. Key findings include:

• Avoid gearing offerings to generic broadband users; instead, focus on serving needs of particular segments.
• Observing broadband consumers’ attitudes leads to the most meaningful segmentation analysis of the user base.
• Four key segments of the broadband audience stand out, differing in terms of attitudes, demographics, and online activities.

Conventional marketing strategies don’t translate well to broadband services. Jupiter Research finds that broadband tenure and time spent online have little to do with segmenting the marketplace. In order to broaden broadband audiences, service providers need to understand the activities of existing users and develop appeals to different segments of subscribers.

But luring new users to adopt broadband services is not the only challenge providers will face next year. Broadband service providers have benefited from low industry-wide churn rates, mainly because consumers have shunned the high price of switching providers.

To date, most of the churn has been involuntary, resulting from providers going out of business. Jupiter Research forecasts that churn rates will inevitably increase in 2003. Savvy broadband service providers should start developing subscriber retention strategies so they will not be caught short by churn.

As broadband marketing evolves beyond selling speed and avoiding second phone lines, providers need to tailor marketing strategies to specific types of consumers in order to push broadband penetration rates higher while minimizing customer churn.

Based in New York City, Jupiter Research is a division of Jupitermedia Corp., which is also the parent company of ISP-Planet.

Reprinted from ISP-Planet.