Broadband Hooks Up 13.1 Million Users

According to a new study from Jupiter
, U.S. broadband service providers added approximately 1.3
million net new households in the second quarter of 2002. About 13.1 million
households across the country currently use broadband services to connect
to the Internet.

The growth of broadband uptake in the U.S. is on pace to meet Jupiter’s
forecast of 15.4 million households by the end of this year. However,
quarterly growth rates have fallen significantly between 2001 and 2002.
Joe Laszlo, Jupiter Research lead broadband analyst, said this is due
in part to price sensitivity among would-be users.

“While many providers offer discounts on the first three to six months of service,
this may not overcome consumer sticker shock,” Laszlo said. “Consumer DSL offerings
grew by 10 percent in the second quarter of 2002, while the cable modem audience
grew by 12 percent from a much larger subscriber base. Higher average prices
for DSL than for cable largely explain this difference.”

Laszlo cautioned that broadband service providers would need to broaden
their marketing efforts and focus on new audience segments in order to
make substantial subscriber gains in 2003.

“Cresting 20 percent of the online audience creates another worry for
broadband service providers,” Laszlo said. “Most classic early adopters
have broadband at this point, and new strategies and messages will likely
be required to entice increasingly mainstream dial-up users to broadband.”

In its new report, Broadband User Segmentation: Understanding and
Targeting the Broadband Audience,
Jupiter Research suggests that companies
pursuing new broadband users must start considering specific segments
within the audience, not the audience as a whole. Key findings include:

  • Avoid gearing offerings to generic broadband users; instead, focus
    on serving needs of particular segments.
  • Observing broadband consumers’ attitudes leads to the most meaningful segmentation
    analysis of the user base.
  • Four key segments of the broadband audience stand out, differing in terms
    of attitudes, demographics, and online activities.

Conventional marketing strategies don’t translate well to broadband services.
Jupiter Research finds that broadband tenure and time spent online have
little to do with segmenting the marketplace. In order to broaden broadband
audiences, service providers need to understand the activities of existing
users and develop appeals to different segments of subscribers.

But luring new users to adopt broadband services is not the only challenge
providers will face next year. Broadband service providers have benefited from
low industry-wide churn rates, mainly because consumers have shunned the high
price of switching providers.

To date, most of the churn has been involuntary, resulting from providers
going out of business. Jupiter Research forecasts that churn rates will
inevitably increase in 2003. Savvy broadband service providers should
start developing subscriber retention strategies so they will not be caught
short by churn.

As broadband marketing evolves beyond selling speed and avoiding second
phone lines, providers need to tailor marketing strategies to specific
types of consumers in order to push broadband penetration rates higher
while minimizing customer churn.

Based in New York City, Jupiter Research is a division of Jupitermedia
, which is also the parent company of ISP-Planet.

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