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Leslie Bonacum
847-267-7153
mediahelp@cch.com
Neil Allen
847-267-2179
neil.allen@wolterskluwer.com

Consumers Want Their Internet Connections Fast: High-speed Access Subscriptions Reach Record High In Third Quarter

Reality Hits Free ISP Market As Ad-Supported Providers Struggle to Keep Their Customers Coming Back

(WASHINGTON, D.C., November 6, 2000) – Consumers appear to be latching on to the idea of high-speed access, with growth in new online customers during the third quarter coming almost entirely from new digital subscriber line (DSL) and cable-modem services, according to TR’s Online Census. TR’s Online Census is compiled by Telecommunications Reports International (TRI), (www.tr.com), the leading telecommunications information publisher and a unit of CCH INCORPORATED (CCH).

The number of consumer DSL subscribers more than tripled during the third quarter, with more than 1.2 million customers having service. High-speed cable-modem access, which has been an access option longer than DSL has been around, also continued to show healthy growth. More than 3.5 million customers now have cable-modem online access, up 27 percent from last quarter, according to the study. TR’s Online Census, conducted quarterly since 1980, is the definitive survey of online access methods and trends.

As for the overall market, the nation’s largest Internet service providers (ISPs) now reach 63.2 million household customers, including those who access via traditional dial-up, Internet television, digital subscriber line (DSL) and cable-modem services. That’s just a 1.49-percent increase over last quarter’s survey results.

"While high-speed access only accounts for about 7 percent of the online market, it’s far out-stripping the growth rates of the overall market," said Amy Fickling, managing editor of TR’s Online Census. "There’s a set of consumers willing to pay a premium price for faster access, and the ISPs seem to be responding, offering more high-speed packages and expanding access to more locations."

Free ISPs Hit by Reality

During the second quarter, dial-up ISPs saw phenomenal growth, in large part fueled by aggressive promotions from free ISP services to sign on more customers.

In the third quarter, however, reality set in for these free, ad-supported providers. While they’ve shown a tremendous capability to sign up new customers, many are now acknowledging that only 40 percent to 50 percent of the customers that sign on are "active" users. As a result, TR’s Online Census has adjusted its counting method for the third quarter to reflect active subscribers only for this category.

"The attractiveness of the ad-supported ISP model is that the barriers for customers to sign on is virtually non-existent. It costs them nothing," said Fickling. "However, the challenge for these ISPs is that beyond attracting new customers, they have to figure out effective ways to retain them because advertisers expect these customers to keep coming back."

Online Growth by Category

Service Category

Number of Customers

Growth During 3Q 2000


Dial-Up ISP


57,337,054


-1.39%

Cable Modems

3,505,050

26.60%

Internet TV

1,143,400

2.51%

Digital Subscriber Line

1,264,253

341.58%

Total

63,249,757

1.49%

Source: TR’s Online Census,
Telecommunications Reports International

A Mixed Bag for Dial Up ISPs

The most popular access method remains dial-up ISPs, which accounts for more than 57 million customers. The decrease from last quarter reflects the adjustment in the survey to count only active subscribers among free ISP customers.

Approximately 42.7 million of these subscribers use paid ISP services, while 14.6 million are active subscribers to free ISP services, according to TR’s Online Census.

Leading the paid dial-up ISP pack is America Online, with 24.5 million customers, dominating the ISP industry by maintaining a 39-percent share of the overall consumer base. EarthLink, MSN Internet Access, CompuServe and Prodigy round out the top five.

On the free dial-up ISP side, the survey reports Juno Web is the clear market leader with 3.7 million active subscribers. Spinway, 1stUp.net, NetZero and AltaVista round out the top five free ISP market leaders.

Growth in High-Speed Access Shores Up the Market

While free ISPs struggle to figure out how to keep customers coming back, high-speed access providers are trying to keep pace with market demand.

The DSL market saw the greatest growth among all categories, with a 341-percent increase in new customers. SBC now leads the DSL provider market with 435,000 subscribers, followed by Covad, Qwest, Verizon and EarthLink, according to TR’s Online Census.

Cable-modem providers also recorded continued growth, with nearly 27 percent more subscribers signing on during the quarter. According to the survey, @home, carried by AT&T, Comcast and Cox, remains the undisputed leader with 2.3 million subscribers, nearly one-third of the overall market share. Road Runner, carried by Time Warner, reports the second-highest subscriber base, with 1.1 million customers.

Internet TV Inches Forward

Breaking its two-quarter stall, Internet TV providers showed a very slight increase of 2.5 percent in subscribers during the third quarter, according to TR’s Online Census. Microsoft’s WebTV commands nearly the entire market. However, AOLTV, available in only three pilot markets at the end of the third quarter, is expected to expand and be promoted heavily during the upcoming holiday season. This could change the face of the Internet TV market significantly in the months ahead.

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 www.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. The CCH web site can be accessed at www.cch.com. The CCH Business and Finance Group web site can be accessed at http://business.cch.com.

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EDITORS NOTE: For members of the press, a complimentary copy of TR’s Online Census is available by contacting Leslie Bonacum at 847-267-7153.

       


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