DSL Making Gains in Consumer Broadband Market

Thanks to some aggressive marketing, the majority of consumers who have a choice among various high-speed Internet access technologies are choosing DSL, according to a study by The Strategis Group. But cable modems still lead in customer satisfaction.

According to the report “Broadband Users: Cable vs. DSL”, of the 55 percent of current broadband users who have a choice between DSL and cable modems, 60 percent are choosing DSL services. Despite the popularity of DSL, a greater percentage of cable modem users are satisfied with their service based on several measures, when compared to cable modem users — overall quality, access speed, and “always on” connectivity. For example, the study found that 48 percent of cable modem users are “extremely satisfied” with their service, compared to 43 percent of DSL users. The Strategis report is based on the survey responses of over 1,600 broadband subscribers nationwide.

Strategis Group analyst Keith Kennebeck said the contradiction between cable modems’ higher satisfaction scores and DSL’s popularity indicates the superior marketing of DSL compared to cable modems. “Since more people know about DSL, more people demand it,” Kennebeck said.

The study also found that cable modems’ higher level of satisfaction led to a lower churn rate compared to DSL. Potential churn among DSL users is nearly twice as high as that of cable modem users, 15 percent versus 8 percent. “Therefore, while DSL providers may acquire more customers due to their superior marketing efforts, they may eventually lose a higher percentage of customers to other DSL providers or to other access technologies than their cable modem counterparts,” said James Mendelson, a Director for The Strategis Group.

Cable modems, thanks in large part to their early market entry, had been thought to be the leader in residential high-speed access, while DSL has been popular among small businesses. The US is the worldwide leader in cable modem subscribers, and is expected to have 14 million cable access subscribers in 2005, according to Allied Business Intelligence, an increase from 2.1 million in 1999. Worldwide, Allied predicts 58.6 million cable subscribers by 2005, up from 3.3 million worldwide in 1999.

Before telecom firms began to aggressively market DSL, cable access capitalized on its ease of installation. Cable networks do not present line-qualification problems, which can delay or prevent DSL installation.

In addition to its increasing popularity with residential customers, US mid-sized companies (those with 100 to 999 employees) are expected to show growing demand for DSL services in the year 2001, according to a study by Cahners In-Stat Group.

In-Stat’s study, “All Business is eBusiness: Internet Infrastructure, Access Technologies & the Build-up“, found that the majority of main and branch office locations used some sort of broadband access at the end of 2000,but as much as 20 percent still relied on dial-up services. Looking into 2001, In-Stat expects these customers to migrate away from dial-up as quickly as possible to affordable DSL services across their locations, especially their smaller sites, and this may even lessen demand for traditional T1 services in the coming year as a result. Roughly 64 percent of middle-market employees had at-work Web access at the end of 2000.

“Mid-sized businesses have been consistently fragmenting into a network of smaller locations for the last few years. Because of this trend, these firms’ demand for high-end connectivity services is expected to fall in favor of more cost effective and appropriate DSL services,” said Kneko Burney, director of eBusiness Infrastructure & Services for In-Stat. “This is actually an opportunity for service providers to not only offer DSL services for this market’s smaller locations, but to also begin bundling other related services, such as VPNs, remote network management and possibly hosted applications with this type of core connectivity. This type of strategy will certainly be key in sustaining long-term relationships with these evolving customers.”

Another opportunity exists for DSL providers among the growing number of telecommuters in the mid-size business market.

According to Emmelin Cardella, research analyst for In-Stat’s eBusiness Market Segmentation Group, just under 80 percent of middle-market telecommuters were still using dial-up services to access the Web from home at the end of 2000. More than half will still rely on dial-up Internet infrastructure by year’s end, giving DSL providers more opportunities in the residential DSL market.

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