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Broadband Overtakes Dialup While DSL Gains

Although not terribly shocking, a new consumer survey confirms that high-speed Internet service now rules in the U.S.

In a study released earlier this week, J.D. Power and Associates found that 56 percent of home Internet surfers now pay for broadband service, up from 45 percent a year ago. Correspondingly, 44 percent of residential Internet users still opt for dialup service, down from 55 percent in 2005.

But, in a bad omen for the cable industry, DSL subscribers seem much happier with their broadband provider than do cable modem customers, thanks largely to lower DSL prices. Noting that DSL customers heavily cited "cost of service" in their satisfaction ratings, researchers blamed most of the gap on "aggressive pricing" by the phone companies.

In spite of DSL's higher customer satisfaction rates, cable operators retain the upper hand in the broadband market. In the survey, 32 percent of U.S. Internet households reported subscribing to cable modem service, up from 28 percent in 2005.

The telcos, however, are clearly gaining on their cable rivals. The study found that 23 percent of Internet homes now take DSL service, up from 16 percent a year ago.

The overall shift to broadband by consumers shows no sign of abating anytime soon. J.D. Power found that 21 percent of dialup users plan to switch providers in the next few months, up from 18 percent a year ago. Just 11 percent of broadband subscribers expressed the same intent, roughly the same amount as in 2005.

Steve Kirkeby, executive director of telecommunications and technology research at J.D. Power, credits much of the broadband surge to the growing popularity of service bundles. "Although high-speed Internet service is still considerably more expensive than dialup, bundling high-speed with other products, such as telephone and video service, has made it an increasingly attractive option for many customers," he says. "Customers are often willing to pay more for faster Internet speeds, provided they are getting other services for less."

At the same time, broadband prices, while still more than double dialup rates, have been falling faster than narrowband prices over the past couple of years. The study found that broadband subscribers pay an average of $42.13 per month for their speedy service, down $1.99 from $44.12 in 2004. In contrast, dialup users spend $18.45 per month, down a mere 69 cents from $19.14 two years ago.

WideOpenWest (WOW) ranked tops among broadband providers, scoring highly for performance and reliability, image, customer service, billing, cost of services, and offerings and promotions. Bright House Networks' Road Runner service took second while BellSouth placed third.

PeoplePC, a California-based provider, rated highest on the dialup side. BellSouth ranked second and EarthLink came in third.

— Alan Breznick, Site Editor, Cable Digital News

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