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Number Of Consumers Online Increases 24 Percent In Second Quarter
Price Wars May Be Near for Fee-Based ISPs as Free, Plugged in and
High-Speed Access Providers Are Signing Up Record Numbers of Subscribers
(WASHINGTON, D.C., August 9, 2000) More than 11 million consumers joined the
online ranks during the second quarter of 2000, an increase of nearly 24 percent since the
end of last quarter, according to TRs Online Census. However, rather than pay
a basic monthly service charge to a fee-based, dial-up Internet service provider, more
consumers are flocking to free, ad-supported services, or showing a willingness to pay a
premium for high-speed cable modem or digital subscriber line (DSL) services. TRs
Online Census is compiled by Telecommunications Reports International (TRI), the
leading telecommunications publisher and a unit of CCH INCORPORATED (CCH).
According to the quarterly survey of online subscribership, the nations largest
Internet service providers (ISPs) now reach 62.3 million customers, including those who
access via traditional dial-up, Internet television, digital subscriber line (DSL) and
cable modem services.
TRs Online Census, conducted quarterly since 1980, is the definitive
survey on online access methods and trends.
"Free ISPs fueled the tremendous growth in Internet access accounts this quarter
and have reshuffled the lineup of the nations largest consumer-oriented online
service providers," said Amy Fickling, managing editor for TRs Online Census.
"Meanwhile, high-speed providers, particularly DSL providers, continue to show
significant growth rates, while most of the leading fee-based dial-up ISPs showed only
single-digit percentages in their growth rates, if that."
Online Growth by Category
The most popular access method remains dial-up ISP, which now accounts for more than
58.1 million customers. However, the 24-percent growth rate in this segment during the
second quarter is due in large part to the success of free ISP services. Many of these
free services show significant growth, while fee-based ISP growth hovered at around 5
percent on average.
With a growth rate of 51 percent, the category for DSL shows the most significant
increase for the quarter. With just 286,300 subscribers, DSL is the newest entrant in the
market. Also showing a healthy gain is cable modem access, with a 21-percent growth rate
during the quarter to nearly 2.8 million customers. Internet TV, on the other hand,
remains stagnant at 1.1 million users, according to TRs Online Census.
Online Growth by Category
|Digital Subscriber Line
telco dial-up ISP users)
Source: TRs Online
Telecommunications Reports International
Free ISPs Leave Their Mark
One-half of the top 10 ISPs listed in TRs Online Census are now
ad-supported providers. Collectively, the free ISPs account for 27 percent of the customer
base served by the nations largest ISPs. As America Online, with more than 23
million customers, accounts for another 37 percent of the ISP market, that means that only
36 percent of the market remains for the dozens of other participants to compete for.
According to the studys findings, the top 10 ISPs now account for 88 percent of
the total online audience. These providers for the second quarter are America Online, 1stUp.net
(free), NetZero (free), EarthLink, Spinway (free), Juno Web (free), CompuServe, MSN
Internet Access, Prodigy and Freeinternet (free).
Among the free ISPs leaping into the forefront during the second quarter was 1stUp.net
Corp., with 4.2 million customers, mostly gained through its private-labeled services for
Alta Vista Co. and Excite@Homes FreeLane. Another new top-tier entrant is Spinway
Corp., with 3.6 million users, most of whom have signed up for Kmarts BlueLight.com
access service powered by Spinway. Juno Online Services Co. also migrated 3 million of the
customers who used its free e-mail service over to the free Juno Web ISP service.
While TRs Online Census finds that many of the customers who are signing
up for the free services are existing online users who want an additional account for
personal use, the increased popularity of free ISP service is taking a toll on traditional
One victim of the free ISPs success is AT&T WorldNet, which showed nearly a
one-third loss of customers during the second quarter, knocking it out of the top tier of
access providers. In response, WorldNet introduced "i495", a low-priced ($4.95
per month) service, in July. AT&T expects that about one-half of its remaining 1.5
million WorldNet users will abandon its $21.95 per month full-fee service for the
"Its likely that this move by AT&T will set off the next round of price
wars in the ISP business, as the providers try to capture greater market share among
consumers who are clearly showing a preference for low- or no-cost service when it comes
to dial-up access," said Fickling.
Growth in High Speed Access Continues to Accelerate
While the free versus fee-based dial-up ISPs fight for market share, many consumers are
showing that theyre willing to pay a premium price for high-speed access.
The DSL market saw the greatest growth among all categories this quarter, with a
51-percent increase in its customer base to 286,300. Among those showing the greatest
growth during the quarter were SBC and Covad Communications Group Inc., recording
increases of 136 percent and 75 percent, respectively, in the number of DSL subscribers.
SBC, US West and GTE, in order, are the leading DSL providers, according to TRs
Online Census figures.
Cable modem providers also recorded continued growth, with 24.5 percent more
subscribers signing on during the quarter. This brings the number of consumers accessing
the Internet via cable modem to nearly 2.8 million. The two undisputed leaders in the
cable modem market are AtHome followed by Road Runner. Together, they account for 98
percent of the overall cable modem market.
Internet TV On Hold
For the second consecutive quarter, Internet TV seems to be stuck in neutral with no
significant changes in the number of subscribers. Microsofts WebTV, with nearly 99
percent of the subscribers, remains the giant in this market.
To Obtain TRs Online Census
Annual subscriptions to the quarterly online census are available for an introductory
price of $149 by calling 1-800-822-6338.
About TRI and CCH INCORPORATED
Telecommunications Reports International, based in Washington, D.C., is the most
respected provider of telecommunications industry news and analysis. Since 1934,
executives and policy-makers have relied on TRIs comprehensive coverage and analysis
of major industry issues and events. TRI is part of the Business and Finance Group at CCH
INCORPORATED, a leading provider of tax and business law information and software. The TRI
web site can be accessed at www.tr.com.
CCH has served more than four generations of business professionals and their clients,
covering a wide range of legal and compliance topics including securities, insurance,
banking, telecommunications, trade regulations and government contracting. CCH is a wholly
owned subsidiary of Wolters Kluwer. The CCH web site can be accessed at www.cch.com. The CCH Business and Finance
Group web site can be accessed at http://business.cch.com.
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EDITORS NOTE: For members of the press, a complimentary copy of TRs Online
Census is available by contacting Mary Dale Walters at 847-267-2038.