04/25/2002 - Updated 11:24 PM ET
Web surfers snub pricier broadband Internet access
By Andrew Backover, USA TODAY
Broadband growth continues to slow as customers balk at higher prices and
companies scale back promotions.
The number of new broadband subscribers grew 12.6% in the first quarter
from the previous quarter, based on results from eight of 17 major players,
research firm ARS says.
That means it's likely that the industry's overall growth will fall short of the
15.8% growth from the third to the fourth quarter last year.
"If prices keep going up while the economy is going down, you have a perfect
recipe for slowing broadband growth," says ARS analyst Mark Kersey. The
slowdown could worsen because the second quarter is usually the slowest for
broadband growth, analysts say.
The biggest slowdown appears to be in digital subscriber line (DSL) service.
Verizon Communications signed up 13% more new customers in the first
quarter, down from 23% growth in the fourth. BellSouth's DSL customers
grew 17% compared with 34%.
In high-speed access via cable, AT&T Broadband posted 9.4% subscriber
growth from the fourth to the first quarter, barely besting a lackluster 8.5%
rise in the fourth quarter. AOL Time Warner's growth dropped to 14.5%
from 15.4%. Behind the trend:
Price. The average monthly cost of cable modem service in the fourth
quarter of last year rose to $44.22 — up 19% year-over-year.
Monthly DSL prices rose 7% to $51.67. As consumers feel the
economic slowdown, many are deciding to skip the extra expense. A
recent survey by Jupiter Media Metrix found that 76% of dial-up users
were not keen to pay more for broadband. While about 70 million
U.S. households could get broadband, only 11.6 million do. Prices
aren't likely to fall. Dozens of broadband players have folded or curbed
expansion during the telecom implosion. "Pricing is the critical thing,"
says Dave Burstein of DSL Prime.
Marketing. After rolling out big discounts late last year, which
boosted growth rates for the first time in two years, many companies
have now scaled back such deals because they hurt revenue, says
TeleChoice analyst Pat Hurley. Late last year, Verizon offered DSL for
the first three months at $29.95 monthly, plus a free camera. In March,
the cost was $39.95 a month for the first three months, plus a gift. The
$29.95-a-month offer resurfaced Thursday without the gift. Instead,
customers get the first month free if they sign up online. Comcast was
also offering free months last year, but no longer. "There is, in general,
weak marketing by providers," Hurley says.
Content. Though customers rave about faster speeds with broadband
than with dial-up connections, compelling content, such as videos and
music, is sparse. That does not "give people a reason to switch,"
Hurley says.
