The Broadband Picture

Much has been made this week of AOL announcing that it has lost nearly 300,000 members last quarter and blaming it largely on member migration to broadband. Some experts said the online division of the world's biggest media company would not survive the hemorrhage of members much longer. Others posited that the traditional divisions of AOL TW would carry the weight until the webbies figure out how to hold on to their members. But what about this broadband claim?

A recent Edward C. Baig column in USA Today took issue with AOL's new Sharon Stone commercial for the company's broadband service, which shows the actress in bed after an apparent romp with AOL's running-man icon, who promptly dashes off after Stone asks him if he can stay.

"The spot is an amusing juxtaposition, but it also points up a coincidence that AOL Time Warner didn't intend: The only ones leaving the scene lately are AOL's own dial-up members," Baig writes, going on to say that he is not particularly impressed with the company's broadband offerings as of yet.

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And it is those offerings - billed as "must-have" programming and services - that AOL executives are hoping will keep dial-up subscribers from leaving altogether and instead converting them to high-speed AOL users. Will the company be able to convince the public that most of its offerings are compelling, unique and worth the price? Analysts are hesitating to wager any bets, but most agree that AOL has very little time left to come up with a winning plan of action.

According to various reports, as of March 2003, most users in the US connect to the Internet using dial-up modems of 56Kbps or less. 53.26% use 56Kbps modems, 9.79% use 28/33.3Kbps, and 3.17% use 14.4Kbps modems. All told, 66.2% of home users in the US connect to the Internet at 56Kbps or less.

Mostly due to the Iraq conflict, broadband penetration in US homes slowed somewhat in March. As of March 2003 broadband penetration was at 33.8%, up from 33.5% in February. In contrast, broadband has increased by over 1.2% per month from October 2002 to February 2003. Extrapolating the data provided by Nielsen//NetRatings, broadband share in the US should exceed 50% by June of 2004. eMarketer predicts that by 2005, nearly one-third of American households will have broadband access.

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