• by Ross Fadner , March 9, 2004

Broadband continues on a steady growth curve, according to research data compiled by the Leichtman Research Group and the twenty leading high-speed cable and DSL (Digital Subscriber Line) service providers. The data shows that 24.6 million U.S. households now subscribe to high-speed Internet. Among the 20 top high-speed Internet providers in the United States, which represent 98 percent of the market, 7.4 million high-speed subscribers were added in 2003.

Cable companies including Comcast, Time Warner, Cox, Charter, and Cablevision accounted for 60 percent of the broadband additions in 2003, or 4.5 million, according to data in the report. The major DSL providers, including SBC, Verizon, BellSouth, Qwest, and Sprint, accounted for 3 million additional broadband subscribers. The cable broadband segment extended its market share to 63 percent versus DSL last year. There are now 15.5 million broadband cable subscribers and 9.1 million subscribers to DSL nationwide.

The study revealed that the fourth quarter of 2003 was the best ever for DSL providers: DSL added 870,000 subscribers, or 45 percent of the net high-speed additions for the quarter. However, this doesn't necessarily mean that DSL is mounting an offensive on cable's current high-speed dominance, says Bruce Leichtman, President and Principal Analyst, Leichtman Research Group. "It is premature to proclaim that DSL is catching up to cable," he says. "As the totals indicate, it would be akin to congratulating a basketball team that was losing by 20 points after the first quarter for only being down by 24 points at halftime."

Leichtman notes that consumers have clearly shown a preference for cable, but it is unclear to what extent this preference is based on simple availability. In the United States, high-speed cable modems are far more readily available to consumers than DSL; major cable companies often package cable Internet service together with their cable TV services for a reduced cost.

"High-speed Internet is a green field opportunity that cable companies went after far more aggressively," says Leichtman. He adds that telecommunications companies were "more reticent about jumping on the broadband bandwagon because they initially worried about cannibalizing their existing revenue," which he says came from second household phone lines used for fax machines and narrowband Internet access, among other things.

Now that broadband penetration is approaching critical mass, Leichtman observes that telecommunications companies are clamoring to catch up with cable Internet providers.

A new LRG survey of 1,600 nationwide households, entitled "Broadband Internet Access & Services in the Home 2004," reveals that 62 percent of U.S. residents subscribe to an online service at home, and about a third of these subscribe to broadband. Satisfaction levels among broadband users are far superior to dial-up subscribers; the study shows that 73 percent of broadband subscribers are "very satisfied" with their service versus 49 percent of narrowband/dial-up subscribers. Interestingly, the study shows that only 30 percent of current narrowband users are interested in upgrading to broadband.

According to Leichtman, broadband Internet adoption is the second-fastest growing consumer product or service in the country's history, behind DVD players, since its inception in late 1997. He underscores that the challenge for the industry will be to get the next 25 million connected to the Internet through broadband, a goal he expects will be reached in the next four years.

Leichtman calls the next 25 million a "price-sensitive group," and he says that the price value equation will be a determining factor in whether or not this group upgrades to high-speed technology. "By (2008), the price of cable Internet will have to be around $30," he says.

Cable Broadband Subscribers

               Subs at Year End '03     Net Adds in '03    
Comcast                      5,283,900
1,663,600  
Time Warner          3,228,000               802,000  
Cox                  1,988,527               580,577  
Charter              1,565,600               427,500  
Cablevision
1,057,020               286,895  
Adelphia*              951,406               324,236  
Bright House**         620,000               130,000  
MediaCom               280,000
89,000  
Insight                230,000                85,200  
RCN**                  195,000                42,669   
Cable One              133,800                54,400  
TOTAL TOP
CABLE     15,533,253             4,486,077  
DSL Broadband Subscribers
               Subs at Year End '03     Net Adds in '03  
SBC                   3,516,000
1,317,000  
Verizon               2,319,000               649,000  
Bell South            1,462,000               441,000  
Qwest                   637,000               127,000  
Covad
517,000               136,000  
Sprint                  304,000               153,000   
ALL TEL                 153,028                82,846  
Cincinnati Bell          99,000
24,400  
CenturyTel               83,400                31,100    
TOTAL TOP DSL         9,090,428             2,961,346  
TOTAL BROADBAND***   24,623,681             7,447,423  

Sources: The Companies and Leichtman Research Group, Inc. * Adelphia subscriber counts do not include properties owned by the Rigas family. ** Bright House Networks, RCN, and Cincinnati Bell subscriber counts are estimates. *** Top cable and DSL providers represent approximately 98% of all subscribers. Company subscriber counts may not represent solely residential households.