69.3 Million Consumers Now Online Cable,
DSL Subscribers Now Account for 15 Percent of Overall Market
WASHINGTON, Feb. 26 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 TR's 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 TR's 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, it's apparent a broad group of customers have an interest in high-
speed service."
For the fourth quarter of 2001, TR's 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 Growth During
Customers 4Q 2001
Paid Dial-Up ISP 54,481,752 2.22%
Free ISPs (active subscribers) 4,140,000 (14.63%)
Cable Modems* 6,626,963 n/a
Digital Subscriber Line 3,967,000 12.57%
Satellite 141,000 23.68%
Total 69,356,715 2.13%
* new counting method Source: TR's 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 TR's 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 -- which includes Juno and NetZero -- 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, TR's 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 -- an increase of 68 percent -- according
to the survey. During the fourth quarter, the growth of the DSL market was
almost 13 percent -- 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 TR's 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 they're 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 TR's 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 TRI's 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.