Slow but Steady Speed Subscriptions

Consumer broadband is experiencing growth, particularly in the U.S. and Canada, according to reports. A Jupiter Media Metrix study indicates that even though only 16 percent of U.S. online households subscribe to broadband, more than 24 percent of dial-up consumers are considering signing up for a the service within the next 12 months.

Of the 24 percent that are considering broadband, 8.6 percent are likely to sign up for broadband service in the next year and 15.4 percent were “somewhat interested” in obtaining the high-speed connection.

“Despite rising prices, demand for high-speed Internet connections is increasing,” said Dylan Brooks, senior analyst with Jupiter Research. “Broadband connectivity will soon be the rule, not the exception, for Internet users. For ISPs, the key to reaching this burgeoning nationwide audience is to embrace multiple technologies. Incumbent providers of access and content, not competitive upstarts, will win the broadband battle and make the best partners, even at a premium.”

Jupiter finds that U.S. household broadband subscriptions nearly doubled last year, from just over five million to 10.4 million, and individual broadband users, including those at work, totaled 38 million in 2001 – 32 percent of at-home and at-work Internet users.

Substantiating the growth rate is a study by ARS, Inc. indicating that the number of total broadband subscribers in the U.S. increased 15.8 percent in the fourth quarter of 2001 from the third quarter of 2001. However, subscriber growth in the third quarter of 2001 was just 14.6 percent, the lowest on record.

“The fourth quarter rebound in subscriber growth is a positive sign for the industry,” said Mark Kersey, Broadband Industry Analyst at ARS. “Clearly, the aggressive promotional incentives offered by providers such as Verizon to new subscribers were a key driver in the overall industry growth.”

The Jupiter survey of 3,150 individuals was conducted via email invitation with a link to a Web-based survey form and Jupiter analysts gathered these key results:

  • The top motivator of dial-up users planning to switch to broadband is a persistent “always on” connection (59 percent), and entertainment-related features such as the ability to view quality video (26 percent) and listen to audio (15 percent) are less important.
  • 60 percent of broadband households have an online tenure of more than two years. However, households that have come online in the past 24 months make up a growing portion of the broadband audience: 27 percent in summer 2001 compared with 17 percent in summer 2000.
  • Nearly one-third of broadband households have annual incomes lower than $50,000 today, up from only 26 percent two years ago.
  • An examination of traffic to broadband Web sites of a number of major Internet Service Providers (ISPs) and carriers, found that Road Runner regularly garners over four million monthly unique visitors to its site – more traffic than that to any other provider’s broadband-related site. In comparison, most of the broadband sites of other major carriers each had around 300,000 to 500,000 monthly unique visitors.

While Americans may be slower to embrace high-speed Internet access, Canadian subscribers increased from approximately 1.3 million in 2000 to 2.4 million in 2001, with revenues increasing 89 percent, from $262 million to $496 million, according to a recent study by the Yankee Group. The significant increase is attributed to innovative pricing policies – low price introductory offers that allow broadband companies to build profits later on.

Yankee Group research director Mark Quigley believes that American broadband providers could follow Canada’s methods for increasing subscriptions. “The specials have gotten people interested, and has resulted in way better penetration than in the U.S. The last two quarters have been banner ones for high-speed service in Canada, and the introduction of the lite packs provide a great field to up-sell people to more profitable services,” said Quigley.

“Lite packages,” a concept initiated by cable operators, Rogers and Shaw, allows for relatively high-speed service running at 128K downstream and 64K upstream. This is far below high end, but is still two times faster than conventional dial-up and enough of an improvement to convince people to give the service a try at $24.95 a month.

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