Smaller ISPs Threatening Dominance of Big Boys

Smaller Internet service providers (ISPs) are threatening the dominance of the six largest national subscription providers, as they account for 52 percent of new household subscriptions in the past year, according to a study by J.D. Power and Associates.

The J.D. Power and Associates 2000 National ISP Online Residential Customer Satisfaction Study^sm found that part of the growth among smaller ISPs is due to their strategy of offering the option of high-speed Internet access through either DSL or cable modems.

“A gateway to high-speed access is essential to customer growth and retention,” said Kirk Parsons, director of telecommunications at J.D. Power and Associates. “It is clear that the next battleground among the national and regional ISPs is to attract new customers to their high-speed service. Regional telephone and local cable providers are responding to consumer demand by dedicating greater resources toward rolling out DSL and cable-modem services. As these offerings become available, the top ISPs are expected to move swiftly to build upon and expand their offerings from traditional dial-up to new high-speed access to protect their market positions.”

The study found vast differences in customer satisfaction between households with high-speed access versus traditional dial-up service. High-speed users are significantly more satisfied overall with their Internet service than dial-up users. But not all high-speed connection options perform equally with respect to customer satisfaction:

• Households with cable modems report higher satisfaction levels overall than either DSL or ISDN households. The advantage of cable modems is due primarily to suitability of the services/content and email services.
• DSL households report performance weaknesses in two factors: customer care/technical support and email service. In addition, ISDN customers report much lower satisfaction ratings in ease of use, most notably in ease of signing in or logging on, than either DSL or cable modem customers.

The study, based on responses from 4,173 households nationwide, profiles the six largest subscription ISPs, which account for more than one-half of the residential subscribers in the US, found that AT&T WorldNet ranks highest in overall customer satisfaction among the largest national subscription ISPs. EarthLink placed a close second.

Other findings from the study include:

• On average, subscribers report having used their ISP for two years, and report about 15 hours a week online. More than 93 percent of subscribers report sending/receiving email on a daily basis. Other daily activities included 66 percent who said they surfed the Internet while 32 percent used it for instant messaging.
• 85 percent of ISP subscribers say they have made at least one purchase online, with 40 percent indicating they make at least one purchase per month (up from 31 percent in 1999).
• Due to the increased number of search engines available to consumers, the preference for a particular search engine fell from 56 percent to 42 percent in the past year. Among those users who have a preference, Yahooo continues to receive the most mentions by far at 69 percent, followed by AltaVista (28 percent) and Excite (27 percent).
• Approximately 14 percent of Internet users indicate a strong intent to switch ISPs in the next 12 months. An additional 22 percent say they might consider a switch at some point. Connection speed is most often mentioned as the reason why consumers say they might switch providers (79 percent).