High-speed Net subscribers surpass 9 million

Despite a recent decline in the number of U.S. homes with Internet access, 119,000 North Americans are signing up for high-speed Internet access to their homes per week, according to a study released Friday.

A survey conducted by Kinetic Strategies found there are 9.3 million residential customers of broadband Internet services in North America, which includes 8.2 percent household penetration.

In addition, the study found that cable is outpacing digital subscriber line service, with 70 percent market share. Cable modem providers continue to dominate DSL providers, with an estimated 6.4 million cable modem customers in the United States and Canada, equal to 70 percent of the market.

In comparison, DSL providers served 2.9 million residential subscribers, according to the survey.

Kinetic Strategies President Michael Harris expects broadband to continue to grow despite the recent price hikes and economic slowdown, albeit at a slower rate.

"We expect additional broadband subscriptions to grow despite the economic slowdown," Harris said. "But the acceleration of this growth will be affected by the downturn."

The study follows a recent survey by Telecommunications Reports International that found that Internet access in the United States dropped 0.3 percent during the first quarter of 2001 to 68.5 million homes connected to the Web. This was due in part to a shrinking number of free Internet service providers, according to the study.

Even as a number of broadband Net providers continue to raise their rates, customers continue to hook up to the Web over a high-speed connection.

"I think we have yet to see the impact of the rate hikes made by the DSL providers, because many of the providers in the second quarter followed SBC Communication's decision to raise its rates in the first quarter," said Adam Guglielmo, an analyst at Telechoice. "When the second-quarter numbers come in, we will see a negative impact on that market's growth."

Harris said cable is on track to exceed Kinetic Strategies' original expectation of 8.7 million to 9 million customers in the United States and Canada by the end of 2001.

"With DSL providers raising prices, we expect cable modem providers to see growth," Harris said.

In addition, cable came out of the gates offering bundled packages with Internet access, voice and video applications, making it an attractive buy compared with DSL, Guglielmo said. "Cable has done a good job in bundling applications. This hasn't been the case with DSL, which has raised its prices while cable prices have remained low."

As of June 1 there were 7.6 million residential broadband Internet subscribers in the United States and 1.7 million in Canada, equal to 15 percent penetration of Canadian households, double the U.S. penetration rate.

Harris said he expects the broadband market to grow to where it will catch the attention of content providers.

"Content developers have had a hard time with the levels of broadband penetration," he said. "Eight percent penetration is still small, but we expect penetration within the next four years to go north of 30 percent. So within the next three to four years content providers will begin to see more value in the market."