Broadband Will Get Cheaper, FCC Says

Growing competition will push down prices of services, which are already spreading widely.

Simone Kaplan, Medill News Service

Consumer use of high-speed Internet access services is growing exponentially, hitting 70 percent of the nation's zip codes. That's good news even for those who haven't signed up; the Federal Communications Commission expects greater competition among a growing number of service providers.

The FCC studied broadband adoption trends when researching the competition in the advanced telecommunications services arena. The report, released recently, covers trends through June.

Broadband service subscribers are in all 50 states and Puerto Rico. The presence in 70 percent of the nation's zip codes is an increase from the 59 percent penetration in 1999, the FCC finds. Ninety-six percent of the most densely populated areas have high-speed customers, but broadband is also found in 40 percent of zip codes with the lowest population densities.

The number of high-speed access lines or wireless channels connecting homes and small businesses to the Internet increased 57 percent during the first half of 2000 to a total of 4.3 million lines, the FCC report finds. That's up from 2.8 million at the end of 1999.

Also, the number of digital subscriber lines in service increased by 157 percent to almost 1 million lines, up from 370,000 at the end of last year.

A buyer's market for broadband could emerge, FCC analysts suggest. As broadband becomes more popular, service providers will get more competitive.

The FCC has promoted that competition while continuing to consider whether to regulate the market. The agency has avoided regulation, citing a desire to promote competition. (See "FCC Urged to Act in Broadband Battle.")

Providers May Fight for Customers

Broadband service providers must shift their focus from technology to service and retaining customers, says Joe Laszlo, an analyst with Jupiter Communications.

More than one-third of American households will use a high-speed Internet connection by 2005, Jupiter forecasts in a recent report. During that time, the cost of high-speed Internet access will drop, approaching current dial-up access rates of $20 to $25 monthly.

Broadband technology capabilities will become stable by 2005, and competition will force all service providers to differentiate their products by focusing on customer service, Laszlo says.

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

If providers tailor their services, customers could reap benefits such as greater security, access to educational software, and multi-PC home networking.

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