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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
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
Online Growth by Category
Number of Customers
Growth During 4Q 2001
Paid Dial-Up ISP
Free ISPs (active
Digital Subscriber Line
* new counting
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
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.
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 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 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 North America. The CCH web
site can be accessed at cch.com.
The CCH Business and Finance Group web site can be accessed at business.cch.com.
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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, firstname.lastname@example.org.