Prices, Availability Holding Back Broadband

Only 18 percent of U.S. households currently subscribe to broadband Internet services such as cable modems or DSL, according to TNS Intersearch, but an additional 13 percent said they plan to subscribe within the next six months — a potential jump of 72 percent.

When asked why they have yet to subscribe to these new services, respondents indicated high prices and low availability as the primary factors. Twenty-two percent said that cable modems and DSL were too expensive while 15 percent said these services were not available in their area.

“Clearly, the appeal of these broadband services is becoming more widespread,” said Brenda McFarland, senior vice president of TNS Intersearch. “While the Internet delivery method of choice continues to be the dial-up modem at 50 percent, we are seeing that once the prices of these broadband services come down and they become more accessible, a large portion of Internet subscribers will choose those services.”

Beyond broadband access, a study by Boston Research Group and BroadJump, Inc. examined consumer preference and purchasing behavior for premium broadband services. A survey of 1,000 residential users (600 broadband and 400 dial-up) found that the enhanced services most desirable among broadband respondents are virus protection (indicated by 68 percent of the respondents) and firewall applications (67 percent). approximately half of the respondents also indicated an interest in Internet telephony, instant messaging and streaming audio.

More importantly for service providers for the services. More than 60 percent of the broadband respondents said they would pay on a pay-per-use basis rather than a subscription basis.

“While the level of interest across all services was noteworthy, the willingness to pay a premium for specific services suggests that respondents viewed these as a natural extension of a service provider’s offerings,” said Paul Flaxman, vice president of the Boston Research Group. “As general market acceptance of these services increases, a significant revenue stream is likely to follow.”

Almost 75 percent of all the survey’s respondents preferred a service provider that offers enhanced services over broadband. The respondents also indicated that the availability of specific enhanced services as a critical factor in selecting and staying with their broadband service provider. According to the survey, the availability of enhanced services increases the likelihood that a subscriber will switch to a new method of Internet access (for example, from DSL to cable). It also increases the likelihood that subscribers will switch access providers but keep the same access type (for example, switching from one dial-up ISP to another).

Reasons for Not Subscribing to Internet Access by Technology
Reason Technology
Cable/DSL Cellular
via TV
Not interested 57% 57% 68% 78% 75%
Too expensive 17% 22% 12% 10% 11%
Not available in my area 6% 15% 5% 6% 8%
Don’t have necessary equipment 9% 4% 13% 0% 0%
Too complicated/hard to use 6% 5% 3% 8% 3%
Source: TNS Intersearch

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