U.S. Broadband Growth Steady

Dataquest, a division of Gartner, Inc., reports that the rate of broadband Internet use in the U.S. has nearly tripled over the past two years–growing at a rate of nearly 9 percent each month. Survey results also indicate that the number of U.S. households accessing the Internet via either broadband or dial-up grew at a one percent monthly average during the same time period.

Margaret Schoener, Gartner Dataquest principal analyst of worldwide telecommunications and networking, said broadband uptake in the U.S. is bucking current economic trends.

“Neither the economic slowdown, or the relatively high price points for DSL, cable modem and other broadband access modalities have slowed adoption or demand for these access services,” Schoener said. “In fact, there are many locations where broadband demand is not being met because DSL and cable modem are not yet available as an option.”

In June 2002, cable modem and DSL together represented 88 percent of the household broadband access market in the U.S., up from 70 percent of broadband access in 2000. The more costly and slower-speed legacy Integrated Services Digital Network (ISDN) modality that served nearly one-third of the broadband households in February 2000 is rapidly losing ground to the faster, less expensive modalities, with ISDN now having only eight percent market share.

Amanda Sabia, Gartner Dataquest analyst, noted that over the past three years, a competitive battle between DSL and cable modem has developed, with cable companies clearly being more focused and aggressive in the early stages of this race.

“While cable modem continues to dominate the broadband access market, increasing its overall share from 49 percent in February 2000 to 54 percent in June 2002, DSL has been growing at nearly twice the growth rate of cable modems, with the big loser being ISDN,” Sabia said. “Once the ILECs (incumbent local exchange carriers) got serious about deploying DSL, DSL’s overall market share increased from 19 percent in February 2000 to 34 percent in June 2002.”

Of the nine census-block regions in the U.S., the Pacific and New England areas are the most highly penetrated regions for online households with broadband access. Thirty-four percent of Pacific (California, Oregon and Washington) online households and 33 percent of New England (Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont) online households have broadband access.

Notably, all regions have shown tremendous growth in online and broadband demand. For example, while ranked last among all the regions in online household penetration, the East South Central (Alabama, Kentucky, Mississippi and Tennessee) ranks third in percentage of online households with broadband access.

“Despite the collapse of the dot-com bubble and the focus about government intervention, fundamental demand and supply market factors perceptively narrowed the Internet gap among the nine census regions of the United States,” Schoener said.

The potentially significant revenue streams to be derived from mass-market Internet connectivity, especially over a broadband platform, underpin the battle for household Internet dominance between cable and telecom providers.

Sabia said that right now, there is only limited switching between broadband modalities, so whichever provider reaches a household first will likely keep that household as a customer for the long term.

“Gartner believes there are a significant number of households, both online and offline, to whom the value proposition of broadband has not been effectively communicated,” she said. “Whichever provider breaks the code–a creative combination of price and promotion–will tap this latent market, which could potentially nearly double the current level of penetration.”

The report, U.S. Mass Market Loves Broadband More Than Ever, looks at Internet and broadband adoption rates among U.S. households. Findings were obtained from two conescutive Gartner Dataquest surveys of U.S. households spanning a 28-month period, from February 2000 to June 2002. During the two surveys, 45,000 U.S. households responded via mail-based panel interviews.

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