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The Emergence of Broadband Technology.

Editorial Department

It is projected that more than 28 million US online households, or more than one-third of US online households, are expected to use a high-speed Internet connection by 2005, according to a report by Jupiter Research. But the approach vendors take in marketing broadband seems a little too broad.
Jupiter analysts forecast mild growth in the broadband market during the 2000-2001 time period, but robust growth between 2002 and 2005. Current growth is due to pent-up demand among early broadband adopters, while more mainstream households have yet to catch on to the technology. According to a Jupiter Consumer Survey, 53 percent of all respondents said they have no interest in any broadband offering, compared with 56 percent in 1999.

US Broadband Households
(in millions)
Source: Jupiter Research

"Strong broadband adoption rates will come only as broadband service providers refocus on applications and retention from their first interaction with potential customers," said Joe Laszlo, a Jupiter analyst. "Service providers must tailor packages that are similar to the tiered services offered by cable and satellite providers, which appeal to specific audience segments to build future services and customer loyalty. Suppliers of broadband access and content must deliver services for today's broadband early-adopter demographic, while strategically planning for wider adoption over the next several years."

Laszlo believes that broadband vendors will do better if they narrow their targeting and design packages for specific user groups -- such as telecommuters, active stock traders, families, and gamers. For example, active traders could get a package that includes increased security and bundled financial tools; families could get educational software and a multi-PC network connection.

"Broad, untargeted services will appeal to most consumers, including the price-sensitive, not-very-loyal, and broadband skeptical portions of the online audience," Laszlo said. "Broadband providers must offer high-value, differentiated services to prevent commoditization and price erosion."

Jupiter's research found that price remains the primary reason why consumers have not chosen broadband. Less than 10 percent of households are in the early adopter category that will purchase broadband regardless of cost. Declining infrastructure costs, as well as competition and the bundling of applications with access, will push prices down, bringing the low-end broadband prices in the range of current dial-up access prices ($20 to $25 per month) by 2005, Jupiter found.

Also by 2005, Jupiter predicts cable and DSL access will divide the US consumer broadband market, with cable serving 48 percent and DSL serving 41 percent. Both technologies will prove viable in the long run, with each serving different markets, Jupiter said.

Analog Telephone
Internet Connections
United States
Source: PricewaterhouseCoopers

The broadband estimate from Gartner Group is slightly more ambitious. According to Gartner, 29 million US households will be broadband enabled by 2004. These broadband consumers will also give e-commerce a shot in the arm, as they will spend 20 times more on the Internet when using a high-speed broadband connection than they do with traditional analog dial-up modems. The convenience of a high-speed, always-on connection means shoppers will experience less frustration and time spent waiting at shopping sites.

Of the five countries that took part in PricewaterhouseCoopers' consumer technology survey (Germany, UK, US, France, and Australia), Germans are the only Internet users exhibiting a need for speed. Almost half (48 percent) of Germans use high-speed connections, and 38 percent use ISDN. In Australia, only 3 percent of Internet users aware of broadband technologies use them. Once again, the problem may reside in the marketing.

"Broadband use is growing but not at the rate once anticipated, particularly in the US. The industry needs to show consumers that broadband's benefits outweigh its costs. Providers should look to Germany as a prime example of how to sell the benefits of ISDN usage," said Robert Boyle, European Leader, PricewaterhouseCoopers Entertainment & Media Practice. "To spur adoption, broadband providers need aggressive marketing to change the way their customers perceive this technology."

According to NetValue, only 1 percent of online homes in the UK has broadband access, giving the UK the slowest adoption of broadband Internet services among major Internet countries. In Korea, the rate is more than 30 percent.

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