Report: Broadband Growth Burning Out

Fewer of the remaining Americans not hooked up to the Internet are getting online, and fewer existing dial-up users are spending enough time on the Web to want to move up to broadband access, reports the Pew Internet Project in its latest study on U.S. broadband growth.

Pew's May 2005 survey indicated that 53 percent of Americans get online with high-speed connections, up 3 percent since December 2004, but described by Pew as a "statistically insignificant increase" that is likely to remain flat or even drop further in the near future.

Analysts attribute the slowdown to a saturation of users, and a reluctance of today's dial-up Internet users to pay more for bandwidth that they don't necessarily need.

"The issue is that the remaining pool of dial-up users today is a different demographic category," author of the report and Pew research director John Horrigan told the E-Commerce Times. "A couple years back, you had people making the bit-per-buck calculation, where the dial-up wait was costly in time, and prompted them to switch. The existing pool of dial-up users is not accessing as many bits."

Tepid Internet Use

Horrigan explained that while previous dial-up users were heavy users who then had a need for more bandwidth, today's dial-up users in general do not use their connections enough to want a speed increase.

"Today's dial-up users are older, less educated and with lower income than their counterparts in 2002 -- all factors associated with tepid use," he said.

Horrigan also noted that, because those no longer signing up for Internet access are typically surrounded by similar people, the number of new Internet users overall will also remain flat.

"The pool isn't being replenished," he said. "I think we're close to the saturation point."

Pushing Down Price

Horrigan did say, however, that he expects prices for both dial-up and broadband to go lower as a result of the slowed adoption of both. He also added that, at some point, there will be a demand for even faster broadband Internet connections, likely based again on heavy use.

Forrester research Vice President Lisa Pierce told the E-Commerce Times that although the home broadband adoption rate in the U.S. may be slowing, it is still greater than broadband adoption in Europe.

Pierce also agreed that the slowed market is causing price drops for dial-up and faster broadband services.

"That's the reason for these low-end DSL offers," she said.

Growth With Reliability

Pierce pointed out that one-third of U.S. households with PCs do not have any Internet connection, adding that while there is an opportunity for new users there, it would be difficult.

"There's ground left to plow, but it's very rocky," she said.

The analyst also said there remains a good deal of business interest in broadband, but availability and reliability are among factors holding back that segment of the market, as well as consumers.

"One of the things that could spur broadband, for both, is reliability," she said, referring to concerns over the cost of outages and time offline.