Broadband to be Broadly Available

Three out of four U.S. homes will be able to receive Internet access from cable modems or digital subscriber line service over phone lines by the end of the year, according to a study released this week by the Yankee Group market research firm.

However, broadband availability is one thing and broadband use is another.

Even though three-quarters of homes will be able to get broadband, only about 4 percent to 7 percent of customers actually sign up for the service as soon as it's available, says Matt Davis, a senior broadband analyst with Yankee.

"There's a group of people that are waiting for broadband, and there's another group that can take it or leave it," Davis says. Over time, the percentage of broadband users will creep into the double-digits, but it will take more than availability to spur mass use of the technology beyond early technology adopters and power computer users, he says. "It needs to be driven by a more compelling application than just availability."

Cable on Top

Cable Internet customer numbers dwarf all other broadband services--twice as many consumers use cable modems as DSL. About two-thirds of homes will have access to cable Internet service by year's end, compared to 45 percent for DSL. About 60 percent of homes had broadband Internet service available to them last year.

Other forms of broadband like fixed wireless access or satellite service are a minuscule part of the market right now, according to the Yankee Group. Large carriers like Sprint and AT&T have either scaled back or eliminated plans to roll out fixed wireless services, citing the state of the economy and the limited market.

Satellite service has suffered largely because it is more expensive than either DSL or cable. Installation cost for a satellite dish can run to hundreds of dollars, even before adding the cost of the equipment and the monthly service bill. Although satellite service is theoretically available to just about anyone with a view of the Southern sky, latency and uplink bandwidth limitations exist, and nontechnical factors like home ownership and the reach of service technicians limit its use, Davis says.

DSL Difficulties

For DSL, as with satellite service, it's expensive to send a technician to a house. DSL installers must determine if a phone line is suitable for DSL service to set up the equipment, making installation a time-consuming affair and ultimately more costly for consumers than cable Internet services, Davis says. Some cable companies provide cable modems that can be installed by customers on their own.

Service providers have been working on new applications, in part to make the higher costs more palatable to consumers. There's a potential market for voice over DSL for cheap phone calls or digital video on demand over phone lines. The hardware to provide these services drops in price as competition between equipment makers heats up and component prices fall for fast processors and network gear.

While adding new services is easier in networks with new technology, the publicly switched telephone network used by the dominant regional Bell operating companies like Verizon Communications or SBC Communications is decades old, making equipment compatibility an additional issue to resolve.