High Speed Access to Pass Dial-Up in 2005

With a growth rate of more than 230 percent, the year 2000 was a watershed period for residential high-speed Internet access in the US, according to research by The Strategis Group, which also predicts a broadband market of 36 million subscribers in 2005, surpassing dial-up access.

The Strategis study, “Residential High-Speed Internet: Cable Modems, DSL, and Fixed Wireless, cites increasing consumer demand and technological innovations such as self-provisioning as major reasons for the predicted growth.

Residential High-Speed Households by Technology, 1999-2005
1999 2000 2001 2002 2003 2004 2005
Cable 1.25 4.11 7.12 9.57 11.88 14.19 16.13
DSL .58 1.93 4.22 6.88 9.38 11.87 14.22
Wireless .01 .06 .19 .95 1.96 3.04 4.71
Other 0 .01 .10 .15 .30 .50 .80
Source: The Strategis Group

Despite the strong momentum of 2000, hurdles still remain for residential high-speed access. Strategis points to infrastructure upgrades and truck roll bottlenecks as challenges that service providers must meet in order to make broadband access ubiquitous.

The Strategis Group predicts that service providers and equipment vendors in both the cable modem and DSL space will have the opportunity to benefit from this growth.

“Deployment of residential broadband is supply-side limited at this time,” said Strategis Group analyst Keith Kennebeck. “In order to cope with this, operators are relying more on automated subscriber installation and management tools to help overcome the bottleneck and meet this demand.”

While cable modems and DSL draw most of the attention in the residential space, other technologies are being developed that will further enable customers to enjoy broadband Internet access. Fixed wireless and two-way satellite technologies have begun to be deployed in several cities around the country. These technologies are expected to play a fill-in role where cable modem and DSL services are not available, and in some cases, compete directly with those technologies.

High-speed access will also be one of the drivers in the market for residential gateways (RGs), which will more than triple over the next five years, growing from 8.6 million units in 2001 to more than 33 million units in 2005, according to a report by Parks Associates. The cumulative value of the residential gateway market is expected to approach $3 billion by 2005.

According to “The Residential Gateway Report: Third Edition”, broadband will combine with high-definition entertainment services and recent advances in home networking technology to induce residential gateway sales. The report also predicts that the US market for residential gateways will also witness new forms of RGs being deployed. These devices will incorporate a variety of different features and formats, ranging from set-tops boxes to whole-house RGs, indicative of the evolution of the RG concept as this market grows.

“The early market for residential gateways suffered from the absence of both sufficient home networking technologies and consumer demand,” said Michael Greeson, analyst with Parks Associates. “Today, however, the technologies most essential to the development of more functional and less expensive residential gateways — including advances in semiconductor design such as system-on-a-chip solutions — will soon be readily available. Moreover, with the market for residential broadband Internet service rapidly expanding, there is interest in the commercial possibilities of the residential gateway because of its unique ability to enable many value-added services.”

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