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Sunday
- September 3, 2000
Number of Consumers Online Increases 24%
More than 11 million consumers joined the online ranks
during the second quarter of 2000, an increase of nearly
24 percent since the end of last quarter, according to TR's
Online Census. However, rather than pay a basic monthly
service charge to a fee-based, dial-up Internet service provider,
more consumers are flocking to free, ad-supported services,
or showing a willingness to pay a premium for high-speed
cable modem or digital subscriber line (DSL) services. TR's
Online Census is compiled by Telecommunications Reports
International (TRI), the leading telecommunications publisher
and a unit of CCH INCORPORATED (CCH).
According to the quarterly survey of online
subscribership, the nation's largest Internet service providers
(ISPs) now reach 62.3 million customers, including those
who access via traditional dial-up, Internet television,
digital subscriber line (DSL) and cable modem services.
TR's Online Census, conducted quarterly
since 1980, is the definitive survey on online access methods
and trends.
"Free ISPs fueled the tremendous growth
in Internet access accounts this quarter and have reshuffled
the lineup of the nation's largest consumer-oriented online
service providers," said Amy Fickling, managing editor
for TR's Online Census. "Meanwhile, high-speed
providers, particularly DSL providers, continue to show significant
growth rates, while most of the leading fee-based dial-up
ISPs showed only single-digit percentages in their growth
rates, if that."
The most popular access method remains dial-up
ISP, which now accounts for more than 58.1 million customers.
However, the 24-percent growth rate in this segment during
the second quarter is due in large part to the success of
free ISP services. Many of these free services show significant
growth, while fee-based ISP growth hovered at around 5 percent
on average.
With a growth rate of 51 percent, the category
for DSL shows the most significant increase for the quarter.
With just 286,300 subscribers, DSL is the newest entrant
in the market. Also showing a healthy gain is cable modem
access, with a 21-percent growth rate during the quarter
to nearly 2.8 million customers. Internet TV, on the other
hand, remains stagnant at 1.1 million users, according to TR's
Online Census.
One-half of the top 10 ISPs listed in TR's
Online Census are now ad-supported providers. Collectively,
the free ISPs account for 27 percent of the customer base
served by the nation's largest ISPs. As America Online,
with more than 23 million customers, accounts for another
37 percent of the ISP market, that means that only 36 percent
of the market remains for the dozens of other participants
to compete for.
According to the study's findings, the top
10 ISPs now account for 88 percent of the total online audience.
These providers for the second quarter are America Online,
1st Up.net (free), NetZero (free), EarthLink,
Spinway (free), Juno Web (free), CompuServe, MSN Internet
Access, Prodigy and Freeinternet (free).
Among the free ISPs leaping into the forefront
during the second quarter was 1stUp.net Corp.,
with 4.2 million customers, mostly gained through its private-labeled
services for Alta Vista Co. and Excite@Home's FreeLane. Another
new top-tier entrant is Spinway Corp., with 3.6 million users,
most of whom have signed up for Kmart's BlueLight.com access
service powered by Spinway. Juno Online Services Co. also
migrated 3 million of the customers who used its free e-mail
service over to the free Juno Web ISP service.
While TR's Online Census finds that
many of the customers who are signing up for the free services
are existing online users who want an additional account
for personal use, the increased popularity of free ISP service
is taking a toll on traditional fee-based providers.
One victim of the free ISPs' success is AT&T
WorldNet, which showed nearly a one-third loss of customers
during the second quarter, knocking it out of the top tier
of access providers. In response, WorldNet introduced "i495",
a low-priced ($4.95 per month) service, in July. AT&T
expects that about one-half of its remaining 1.5 million
WorldNet users will abandon its $21.95 per month full-fee
service for the lower-priced service.
"It's likely that this move by AT&T
will set off the next round of price wars in the ISP business,
as the providers try to capture greater market share among
consumers who are clearly showing a preference for low- or
no-cost service when it comes to dial-up access," said
Fickling.
While the free versus fee-based dial-up ISPs
fight for market share, many consumers are showing that they're
willing to pay a premium price for high-speed access.
The DSL market saw the greatest growth among
all categories this quarter, with a 51-percent increase in
its customer base to 286,300. Among those showing the greatest
growth during the quarter were SBC and Covad Communications
Group Inc., recording increases of 136 percent and 75 percent,
respectively, in the number of DSL subscribers. SBC, US West
and GTE, in order, are the leading DSL providers, according
to TR's Online Census figures.
Cable modem providers also recorded continued
growth, with 24.5 percent more subscribers signing on during
the quarter. This brings the number of consumers accessing
the Internet via cable modem to nearly 2.8 million. The two
undisputed leaders in the cable modem market are AtHome followed
by Road Runner. Together, they account for 98 percent of
the overall cable modem market.
For the second consecutive quarter, Internet
TV seems to be stuck in neutral with no significant changes
in the number of subscribers. Microsoft's WebTV, with nearly
99 percent of the subscribers, remains the giant in this
market.
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