|Broadband Market Growth Narrows|
|Subject||Price and income elasticity of demand|
|Key Words||Slowdown, growth, subscribers, prices, cost, discounts, revenue, consumers, suppliers|
The number of broadband subscribers is increasing, but at a slower rate: 12.6 percent in the first quarter compared to the previous quarter, for 8 of the 17 major players in the market. The slowdown is most marked in digital subscriber line service (DSL). Verizon Communications attracted 13 percent more new customers, down from 23 percent, while BellSouth's growth rate fell from 34 percent to 17 percent. High-speed access via cable has held up better. AT&T Broadband subscribers grew 9.4 percent, up from 8.5 percent, while AOL Time Warner grew its customer base by 14.5 percent, down from 15.4 percent.
Part of the reason is higher prices. The average monthly cost of cable modem service rose 19 percent last year to $44.22, and monthly DSL prices rose 7 percent to $51.67. Discounts have also been cut back. Last year, Verizon offered DSL for the first three months at only $29.99 a month, plus a free camera. In March 2002, the discounted price was $39.99 a month with a free gift. In April, the $29.99 price resurfaced, but with no gift. Comcast no longer offers any discounts. Companies have realized that the deals were hurting revenue.
The economic slowdown is also influencing consumers' behavior. With less
money to spend, many are foregoing broadband access. An industry survey
found that 76 percent of dial-up users were not keen to pay more for broadband.
Prices are unlikely to fall as a number of broadband suppliers have folded
or curbed their expansion. Also, with little Internet content requiring
faster speed connections, there is little reason for consumers to switch
to broadband access.
(Updated June 15, 2002)
|Source||Andrew Backover, "Web surfers snub pricier broadband Internet access," USA Today, April 26, 2002.|
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