Will Apathy Slow Internet Growth?
(04/20/01, 7:09 p.m. ET) By Antone Gonsalves, InformationWeek
The number of U.S. households with Internet access has grown at a phenomenal rate since 1995, but the pace is slowing considerably as Internet service providers struggle with consumer apathy and a lack of compelling services, an industry research firm reported.
Since 1995, the number of U.S. households with Internet access has grown from nearly zero to an estimated 55 million—52 percent of all homes, Cahners In-Stat Group said. But growth has dropped since 2000, averaging between 4 million and 5 million new households a year.
That trend is expected to continue at least through 2005. A third of the people surveyed say they have no need or desire to become wired, said Cahners analyst Daryl Schoolar. Those people tend to be older than 55 and grew up in a non-digital era.
"To get into that last 30 percent, the Internet is going to have to integrate more with the overall home-communications and media experience," Schoolar said.
A large portion of ISP revenue through 2005 will come from people switching from dialup connections to broadband, not services, Schoolar said.
About 90 percent of wired households dial into the Internet today, with the remainder having some type of broadband service. The percentage using dialup is expected to drop to about 50 percent by 2005.
Revenue from services beyond e-mail and research will grow at a faster rate as the number of broadband users increase, Schoolar said.
"But you're not going to see those services take off until there's enough of a market to make them profitable," he said. "From a strategy point of view, any ISP that can capture a 5 million-to-8 million subscriber base of broadband would have a powerful tool when it comes to getting proprietary content for their subscribers."
However, gathering that many high-speed subscribers will be difficult for most ISPs.
Analysts have said that the Baby Bells are the dominant DSL players, while smaller companies selling broadband have had to spend heavily on advertising and promotion and cut prices. As a result, many companies are struggling financially.
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