Expected Growth of Broadband Low, Unless New Initiatives Are Taken

New York, NY -- As phone companies scramble to catch up with cable companies' command of broadband (high-speed) market share, new research from Ipsos-Insight indicates that dropping prices should help in stimulating Americans' interest in subscribing to broadband. But communicating broadband's benefits may be even more important to reigniting the technology's growth, since many American dial-up users are simply not convinced they need broadband, even if the price fell to half of what it has been so far this year. Ipsos-Insight conducted a survey of dial-up users to discover how much growth the broadband market can expect at current and lower price points, and to probe dial-up users' attitudes toward switching to broadband. The findings show that almost two-thirds of Americans are online, and most of them are still connected via dial-up. Four-in-ten dial-up users said cost was a reason they hadn't yet switched to high-speed Internet access. Another one-third are not convinced they need broadband--at all. These figures indicate an imminent slowdown in broadband growth unless new initiatives by providers persuade dial-up consumers that it is worth their while to switch. At current high-speed connection prices (average: $40.70 a month for cable providers), only 3% of current dial-up households are likely to convert to high-speed access. Reducing Price Could Boost Low Expected Growth If prices moved down to $30 a month (see chart), both DSL and cable modem companies could potentially triple new subscriptions vs. the current average (increasing to 10% for DSL, 9% for cable). If they dropped further to $20, one-fifth (20%) of Americans with dial-up said they would sign up for high-speed (whether DSL or cable). But that still leaves 8 in 10 (80%) dial-up users who wouldn't switch, even at the $20 price-point (which is roughly half of what it has been so far in 2003.)

View Larger Version But Real Key Is Understanding Different Consumer Segments Therefore, the data suggest that a large segment of dial-up users don't perceive broadband to represent even a $20-a-month value as yet, or at least so superior to dial-up that it is worth their while to switch. Further, broadband companies need to keep in mind the risk of revenue loss if reducing price is their main marketing strategy. Rolling out the right messaging and positioning--and matching these to the right consumer segments--is therefore crucial if broadband providers are to reach their potential in the U.S. "The expected slowdown in growth is obviously not just about the price-point being too high," said Jo-Ann Osipow, a Senior Vice-President with Ipsos-Insight, the U.S. marketing research division of Ipsos. "It's about a huge segment of dial-up users not being convinced that they need to convert to high-speed, perhaps because "faster" isn't enough of a value proposition. They need to know what "faster" lets them do." "Dropping the cost of subscribing to broadband will help to convert some dial-up users," said Osipow, "but in both the short - and long - term, successful broadband providers will be those who focus their efforts on the customer--as much as on service attributes like faster speed or new features." "They will look closely at the different ways consumers are using the Internet, and thus be able to customize their marketing, communications, and content bundles so that they generate the most impact. Individualized and flexible content packages with access will be important to broadband's growth in the U.S." Methodology Data for this release were collected April 29 and 30, 2003 via Ipsos Express, a nationally representative poll of 1,000 U.S. adults conducted twice weekly. Based on the number of dial-up Internet users in the survey, one can say with 90% confidence that the survey data are accurate to within +/- 4%. For the price elasticity analysis (that is, assessing how many dial-up users would sign up for broadband service at different price points) we used the What Price? component of Ipsos' proprietary IpsosConcept/Tester^sm, which models the relationship between pricing and purchase interest after concept exposure. Only current dial-up users who indicated their homes could be connected to either Cable or DSL were used in the price elasticity analysis (355 respondents). For more information on this release, please contact: Jo-Ann Osipow Senior Vice-President, Ipsos-Insight 516.507.3247