The U.S. market for online access barely grew in 2001, but the news from TR’s Online Census is that Internet users are shifting their access from dial-up to broadband despite a weak economy.
Dial-up access providers saw their first-ever year-over-year decline in number of users in 2001, according to the report published by Telecommunications Reports International (TRI). Overall, the online access market showed hardly any growth (barely 1 percent), growing from about 68.6 million users at the start of 2001 to 69.3 million by the close of the year, according to the fourth quarter results of TR’s Online Census. This compares to a more than 52 percent growth rate for 2000.
“Despite the bleak growth for the industry overall in 2001, there were remarkable strides made in the broadband market, with DSL and cable modem access methods combined recording a 62 percent growth rate for the year, and now accounting for slightly more than 15 percent of the overall online market,” said Amy Fickling, managing editor of TR’s Online Census. “Given the current economy and the fact that both of these sectors saw some difficulties in 2001, most notably the closing of one of the largest cable modem providers and the continued struggles DSL operators are having in rolling out their services, it’s apparent a broad group of customers have an interest in high-speed service.”
The free, ad-supported ISP market was the biggest loser of 2001, the report found. It lost more than 10 million subscribers, declining from more than 14.8 million to just 4.1 million customers by the end of the fourth quarter. Most ISPs offering a free service either closed or changed to a fee-based structure during 2001 as it became increasingly clear that the ad-supported model could not bring in the revenues required to make it a viable option. United Online – which includes Juno and NetZero – now remains the only significant ISP offering a free service option.
Paid dial-up ISPs did continue to report growth during 2001, with an increase of 18 percent for the year. Paid dial-up remains the most popular access method, with nearly 54.5 million subscribers and 80 percent of the overall online access market, but its growth has slowed significantly, with just a 2 percent increase reported during the fourth quarter of 2001.
America Online, with 33.2 million customers registered by the end of the year, continues to be the dominant dial-up ISP. MSN Internet Access, however, the second-largest paid dial-up ISP, reported the strongest growth in customers for the fourth quarter, up 18 percent to 7.7 million. Rounding out the top five-paid dial-up ISPs are EarthLink, CompuServe and Prodigy Internet. Prodigy reported its customer base declined more than 9 percent during the quarter, while EarthLink and CompuServe reported no growth in the number of users during the quarter.
In 2000, @Home was the dominant cable Internet provider with more than 2.9 million customers. Despite @Home’s collapse during 2001, TR’s Online Census found the number of users signing on for cable modem service increased more than 58 percent during the year, from nearly 4.2 million to more than 6.6 million.
The DSL market also saw significant changes during 2001, as nearly all the independent providers ran into difficulties, leaving the incumbent telephone companies as the main choice for many consumers. As with cable, however, DSL also saw significant gains in customers during 2001, from nearly 2.4 million to more than 3.9 million – an increase of 68 percent – according to the survey. During the fourth quarter, the growth of the DSL market was almost 13 percent, which shows signs of some slowing compared to previous quarters, but still remaining one of the growth areas for online access. The two dominant DSL providers, SBC and Verizon, captured more than 2.5 million of the overall 3.9 million DSL customers reported for the fourth quarter, according to the survey.
“While the broadband sectors continue to show strong growth, the overall online market is not growing significantly,” Fickling said. “As a result, even broadband providers recognize they’re going to have to look at ways, such as offering premium services, to attract new customers and to boost revenue per subscriber.”
During the fourth quarter of 2001, the number of consumers using satellite access increased nearly 24 percent, according to the survey. However, with fewer than 150,000 customers and just 0.2 percent of the overall online access business, satellite-delivered Internet access still has a long way to go before becoming a viable option for the general consumer market.
|Online Growth by Access Category|
|Paid Dial-Up ISP||54,481,752||2.22%|
|* new counting method for cable modems
Source: TR’s Online Census
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