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Leslie Bonacum
Neil Allen

Broadband Services Fastest-growing Online Sector While Dial-up Services Stall 69.3 Million Consumers Now Online Cable, DSL Subscribers Now Account for 15 Percent of Overall Market

(WASHINGTON, D.C., February 26, 2002) Ė A significant shift in the online access market began in 2001, with dial-up access providers seeing their first-ever year-over-year decline in number of users, according to Telecommunications Reports International (TRI), the leading telecommunications information publisher and a unit of CCH INCORPORATED (CCH). However, providers of broadband Internet access, including cable modem and digital subscriber line (DSL) connections, closed the year with significant gains, further indicating that consumers want high-speed capabilities when they are online.

Overall, the online access market showed an anemic growth of barely one percent, growing from about 68.6 million users at the start of 2001 to 69.3 million by the close of the year, according to TRís Online Census fourth quarter results released today. This compares to a more than 52-percent growth rate for 2000.

"Despite the bleak growth for the industry overall in 2001, there were remarkable strides made in the broadband market, with DSL and cable modem access methods combined recording a 62-percent growth rate for the year, and now accounting for slightly more than 15 percent of the overall online market," said Amy Fickling, managing editor of TRís Online Census. "Given the current economy and the fact that both of these sectors saw some difficulties in 2001, most notably the closing of one of the largest cable modem providers and the continued struggles DSL operators are having in rolling out their services, itís apparent a broad group of customers have an interest in high-speed service."

For the fourth quarter of 2001, TRís Online Census measured an overall growth rate of just over two percent. While a sluggish rate compared to the same period last year, it is better than the nearly four-percent decline in new customers reported during the third quarter of 2001.

Online Growth by Category

Service Category

Number of Customers

Growth During 4Q 2001

Paid Dial-Up ISP



Free ISPs (active



Cable Modems*



Digital Subscriber Line









* new counting method Source: TRís Online Census,
Telecommunications Reports International

Mixed Bag for Dial-Up ISPs

During 2001, the free, ad-supported ISP market lost more than 10 million subscribers, declining from more than 14.8 million to just 4.1 million customers by the end of the fourth quarter, according to TRís Online Census. Most ISPs offering a free service either closed or changed to a fee-based structure during 2001 as it became increasingly evident that this ad-supported model could not bring in the revenues required to make it a viable option. As a result, United Online Ė which includes Juno and NetZero Ė now remains the only significant ISP offering a free service option.

Paid dial-up ISPs did continue to report growth during 2001, with an increase of 18 percent for the year. While this remains the most popular access method, with nearly 54.5 million subscribers and 80 percent of the overall online access market, its growth has slowed significantly, with just a two-percent increase reported during the fourth quarter of 2001.

America Online (AOL), with 33.2 million customers registered by the end of the year, continues to be the dominant dial-up ISP. However, MSN Internet Access, the second-largest paid dial-up ISP, reported the strongest growth in customers for the fourth quarter, up 18 percent to 7.7 million. Rounding out the top five-paid dial-up ISPs are EarthLink, CompuServe and Prodigy Internet. Prodigy reported its customer base declined more than nine percent during the quarter, while EarthLink and CompuServe reported no growth in the number of users during the quarter.

High-Speed Access Continues Growth Despite Adversities

A year ago, @Home was the dominant cable modem provider, with more than 2.9 million customers. However, amid financial difficulties, @Home collapsed during 2001, leaving cable operators including AT&T Broadband, Comcast Communications and Cox Cable scrambling for an alternative. Despite the turmoil, TRís Online Census finds the number of users signing on for cable modem service increased more than 58 percent, from nearly 4.2 million to more than 6.6 million during 2001.

The DSL market also saw significant changes during 2001, as nearly all the independent providers ran into difficulties, leaving the incumbent telephone companies as the main choice for many consumers. However, as with cable-modem, DSL also saw significant gains in customers during 2001, from nearly 2.4 million to more than 3.9 million Ė an increase of 68 percent Ė according to the survey. During the fourth quarter, the growth of the DSL market was almost 13 percent Ė showing signs of some slowing compared to previous quarters, but still remaining one of the growth areas for online access.

The two dominant DSL providers are SBC and Verizon, capturing more than 2.5 million of the overall 3.9 million DSL customers reported for the fourth quarter, according to the survey.

According to TRís Online Census, one emerging trend is the focus, particularly among the DSL operators, to bundle access with content. For example, many of the Bell companies are stepping up alliances with AOL and Microsoft Network, which will give them prepackaged content. Qwest and MSN also are developing a special portal for Qwest DSL customers. Similarly, SBC and Yahoo! have announced plans to launch a co-branded broadband ISP by mid-2002.

"While the broadband sectors continue to show strong growth, the overall online market is not growing significantly," said Fickling. "As a result, even broadband providers recognize theyíre going to have to look at ways, such as offering premium services, to attract new customers and to boost revenue per subscriber."

Satellite Still Emerging

During the final quarter of 2001, the number of consumers using satellite access increased nearly 24 percent, according to the survey. However, with fewer than 150,000 customers and just 0.2 percent of the overall online access business, satellite-delivered Internet access still has a long way to go before becoming a viable option for the general consumer market.

To Obtain TRís Online Census

Annual subscriptions to the quarterly online census are available for an introductory price of $149 by calling 1-800-822-6338.


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 TRIís 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

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 North America. The CCH web site can be accessed at The CCH Business and Finance Group web site can be accessed at

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EDITORS NOTE: For members of the press, a complimentary copy of TRís Online Census is available by contacting Leslie Bonacum at 847-267-7153,


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