Analysts Predict DSL Juncture:
How to Build a Thriving Broadband Biz Around It

Providing high-speed access is not enough to keep customers loyal to your fold. Researchers offer insight about navigating through broadband service crossroads.

by Jim Wagner of internetnews.com [November 6, 2000]

Any Internet service provider that currently offers, or is thinking about providing consumer broadband services, might want to take a little advice from Jupiter Research.

In a report released last week, one of Jupiter’s top analysts predicts that nearly 28 million, or one-in-three users will be logging-on to the Internet with some type of high-speed service in three years. The trick is, they say, keeping novice broadband users amused.

What's in it for me?
Content is king, the Jupiter report contends. Those ISPs that can build amusing Web destinations at an affordable rate targeting specific audiences will win consumer loyalty in the long run.

Joe Laszlo, Jupiter analyst, said ISPs should shift their marketing messages from one purporting technological benefits to a more service content-focused pitch, because broadband clients are only concerned only about what they get, not how they get it.

"Stronger broadband adoption rates will come only as service providers refocus on applications and customer retention from their first interaction with potential users," Laszlo said.

"Service providers must tailor packages that are similar to tiered service offerings already made by cable and satellite providers, which appeal to specific audience segments and results in high levels of customer loyalty,” Laszlo opined. “Suppliers of broadband access and content must deliver services for today's broadband early-adopter demographics, while strategically planning for wider adoption over the next several years."

VoDSL, not just about voice anymore
Incumbent local exchange carriers, which have never met a market they wouldn't like to dominate, are catching onto the consumer demand for rich content.

A report by Cahners In-Stat research indicates that telephone companies are packing their portfolios with video over digital subscriber line technologies, including passive optical network services and full-spectrum access.

According to Gerry Kaufhold, In-Stat principal analyst for multimedia broadband services, the technology is available to deliver network programming like Disney, CNN and ESPN over DSL, and telecoms already have the necessary infrastructure to deliver the video, they just need the content.

"In order to upgrade their infrastructure to make it capable of delivering video services, telephone companies must set up video distribution points, or headends, that receive TV signals from the networks," Kaufhold said.

"In addition, these companies should purchase and install video servers to support interactive products such as video on demand,” Kaufhold advised. “All the equipment used by telecoms will be connected to residences or end-users through the existing base of local telephone switches."

Kaufhold's report, Video Equipment for Telephone Company Local Switches, found that ILECs are pursuing broadband service strategies that include video delivery technology. Furthermore, the International Telecommunications Union is actively reviewing systems capable of delivering video services, in response to the growing popularity of cable Internet access and its content.

As a result, Kaufhold predicts that the worldwide market for video equipment will reach $2.5 billion by 2005.

Do one thing, do it well
The Jupiter report bears witness to the efforts made by DSL providers to ramp-up deployment of services and establish a firm customer base nationwide. Laszlo predicts that revved-up copper, an underdog technology struggling to overcome last-mile delivery limitations, should achieve parity with cable users by 2005.

Laszlo contends that broadband service providers who target specific, vertical audiences will prevail over high-speed carriers that attempt to be all things — trying serve to all people.

"Broad, un-targeted services will appeal to most consumers, including the price-sensitive, not very loyal, and broadband-skeptical portions of the online audience," Laszlo said. "Broadband providers must offer high-value, differentiated services to prevent commoditization and price erosion."

Laszlo defined his vision of how to build a high-speed, targeted content delivery services further, by citing several examples of what broadband providers could do to build vertical market appeal.

“Active traders and telecommuters should get packages with increased security options and financial and business tools,” Laszlo said. “While vendors looking to capture family markets should bundle educational software, games and multi-PC home networking solutions with high-speed access.”

There's still time
If your Internet services does not offer high-speed access now, there's still time to define your target audience and offer content-specific broadband connectivity. According to Jupiter, the demand for high-speed services will culminate to an apex in 2002. Simultaneously, the cost of DSL services will equalize with monthly cable modem fees.

Despite the presence of Winfire in the broadband market and its FreeDSL services, which are available on a very limited basis, Laszlo believes most customers won’t pay $40 a month for high-speed Internet access. Furthermore, Jupiter claims that as much as 90 percent of American consumers won't pay that price for either flavor of high-speed Internet access.

Being a part of the boom
Jupiter anticipates that the price of high-speed Internet access will decrease over the next few years to bottom-out at around the same price currently paid for dial-up services — about $20 to $25 a month.

Charles Roesslein, Prodigy chairman, president and chief executive, concurs with Jupiter’s prediction. However, he goes one step further to predict that baseline DSL pricing will eventually be lower than current dial-up fees.

Prodigy, through its association with SBC, currently serves more than 246,000 DSL customers. Roesslein said that the future for high-speed services is so bright, Prodigy is shifting gears to ramp-up broadband deployment ... at the expense of ignoring the dial-up market.

"By 2002, maybe 2003, you're going to see $15 a month DSL pricing," Roesslein said. "It's all going to depend on the pricing that the competition sets, but it will get lower than the current rates. That will bring dial-up subscribers to high-speed services in droves.”

It's clear all the major players are shifting their focus to provide broadband access, but few have a handle on the content they will need to deliver with connectivity.

Local and regional ISPs can compete in tomorrow's high-speed market boom if they carve out a niche now and build a community around specific broadband content.

Smaller ISPs may not be able to please all the people — all the time. But regional offerings can build a profitable broadband business out of pleasing some of the people — right now.

—End    

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