U.S. Broadband Growth Steady

Dataquest, a division of Gartner,
, reports that the rate of broadband Internet use in the U.S.
has nearly tripled over the past two years—growing at a rate of nearly
9 percent each month. Survey results also indicate that the number of
U.S. households accessing the Internet via either broadband or dial-up
grew at a one percent monthly average during the same time period.

Margaret Schoener, Gartner Dataquest principal analyst of worldwide telecommunications
and networking, said broadband uptake in the U.S. is bucking current economic

“Neither the economic slowdown, or the relatively high price points for
DSL, cable modem and other broadband access modalities have slowed adoption
or demand for these access services,” Schoener said. “In fact, there are
many locations where broadband demand is not being met because DSL and
cable modem are not yet available as an option.”

In June 2002, cable modem and DSL together represented 88 percent of
the household broadband access market in the U.S., up from 70 percent
of broadband access in 2000. The more costly and slower-speed legacy Integrated
Services Digital Network (ISDN) modality that served nearly one-third
of the broadband households in February 2000 is rapidly losing ground
to the faster, less expensive modalities, with ISDN now having only eight
percent market share.

Amanda Sabia, Gartner Dataquest analyst, noted that over the past three
years, a competitive battle between DSL and cable modem has developed,
with cable companies clearly being more focused and aggressive in the
early stages of this race.

“While cable modem continues to dominate the broadband access market,
increasing its overall share from 49 percent in February 2000 to 54 percent
in June 2002, DSL has been growing at nearly twice the growth rate of
cable modems, with the big loser being ISDN,” Sabia said. “Once the ILECs
(incumbent local exchange carriers) got serious about deploying DSL, DSL’s
overall market share increased from 19 percent in February 2000 to 34
percent in June 2002.”

Of the nine census-block regions in the U.S., the Pacific and New England
areas are the most highly penetrated regions for online households with
broadband access. Thirty-four percent of Pacific (California, Oregon and
Washington) online households and 33 percent of New England (Connecticut,
Maine, Massachusetts, New Hampshire, Rhode Island and Vermont) online
households have broadband access.

Notably, all regions have shown tremendous growth in online and broadband
demand. For example, while ranked last among all the regions in online
household penetration, the East South Central (Alabama, Kentucky, Mississippi
and Tennessee) ranks third in percentage of online households with broadband

“Despite the collapse of the dot-com bubble and the focus about government
intervention, fundamental demand and supply market factors perceptively
narrowed the Internet gap among the nine census regions of the United
States,” Schoener said.

The potentially significant revenue streams to be derived from mass-market
Internet connectivity, especially over a broadband platform, underpin
the battle for household Internet dominance between cable and telecom

Sabia said that right now, there is only limited switching between broadband
modalities, so whichever provider reaches a household first will likely
keep that household as a customer for the long term.

“Gartner believes there are a significant number of households, both
online and offline, to whom the value proposition of broadband has not
been effectively communicated,” she said. “Whichever provider breaks the
code—a creative combination of price and promotion—will tap
this latent market, which could potentially nearly double the current
level of penetration.”

The report, U.S. Mass Market Loves Broadband More Than Ever, looks
at Internet and broadband adoption rates among U.S. households. Findings
were obtained from two conescutive Gartner Dataquest surveys of U.S. households
spanning a 28-month period, from February 2000 to June 2002. During the
two surveys, 45,000 U.S. households responded via mail-based panel interviews.

News Around the Web