Modem times: Researcher predicts dial-up will prevail for years
By Margaret Kane
August 20, 1997 ZDNN
Internet usage may be soaring, but the high cost of access will keep the average consumer in the slow lane of the info highway for at least five years, according to a study by the Gartner Group Inc.
The research firm, based in Stamford, Conn., predicted today that because of high costs, at least 65 percent of consumers will still be accessing the Internet through dial-up modems by the year 2001.
Other forms of access, including cable modems and ISDN, will be used by a limited number of high-income families, said Gartner Group senior analyst Eric Paulak, who released the study discussing the impact of the global network on consumers and businesses during the next five years.
While Paulak predicts the number of households with Internet access will double to about 40 million by 2005, cable modems will account for only about 10 percent of them, with ISDN service peaking in 2002 with around 15 percent of households.
"Most consumers will not be able to afford the $50 to $60 monthly cost of cable modem access," Paulak said.
And those users will be accessing the Internet through a smaller number of Internet service providers. Paulak believes 90 percent of the 4,500 ISPs currently in business will have folded or merged during the next five years, driven out by increased competition from the telephone companies.
"AT&T was very late coming into the marketplace, coming out with a service only about 18 months ago. AT&T is now the largest independent ISP, and they did it without advertising for the first six months after introduction," he said.
Paulak said that AT&T's brand recognition, along with intense media coverage, helped spur that company's business. The other telephone companies may not have the same success, but they will be able to appeal to customers by offering "good enough and cheap enough" service, plus the local attraction of their brand names.
The industry has already seen a spate of mergers between telcos and ISPs, he said, pointing to GTE Corp.'s acquisition of BBN Corp. as one example.
Some small local ISPs will survive, but only by offering something extra to their customers -- content, particularly the specialized, local content not available from national providers. Companies that team with local media such as newspapers and radio stations will be able to offer the "news you can use" type of service that will appeal to some consumers.
The predicted ISP shakeout might not affect business users that much, because they may use Internet alternatives to WANs. Paulak estimated that 5 percent of Fortune 1000 companies will use the Internet to support their intranet needs by 2001, choosing instead to deploy frame relay services.
Managed frame relay offerings end up being much more cost effective for businesses, particularly since the majority of locations that are not headquarters do not need full-scale T1 access, he said. |
