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The implosion in the competitive digital subscriber line market and consolidations in the cable modem space may have soured the investment market, but industry analysts are apparently still sweet on the future of the high-speed Internet market.
The latest case in point is a study released by the Strategis Group that predicts broadband access will overtake dial-up by the year 2005.
The Strategis analysts have concluded that the market woes-including the fallout in the competitive DSL market, nagging problems with service and provisioning and dwindling stock prices among cable and telco players-have bottomed out, and things should improve in the coming year.
Through 2005, the study predicts parallel growth of cable and DSL service, with cable maintaining the lead. By 2005, cable modem service will have a little more than 16 million customers, compared to a little more than 14 million for DSL. While some might wonder if recent market setbacks might cool projections, "on the contrary-the figures are higher than in previous studies," says lead analyst Jason Marcheck. "We think it is probably going to pick up, based partly upon but not exclusively because of the proliferation of self-installation."
With a combination of cable, DSL and fixed wireless broadband reaching all major metro areas and increasingly penetrating secondary markets, the study concludes the focus now will be on improving service.
"In large part cable and DSL are deployed where they want to be," Marcheck says. "The attempt now is a shift from a pure land grab toward solving provisioning issues that created the bottleneck in 2000."
But the study also noted consumers remain unwilling to open their pocketbooks for fast Internet service. A survey of consumers indicated the interest level falls as the cost increases-ranging from 33.9 percent interested if broadband access is priced at $25 a month down to just 4.9 percent if the service costs $60.
"There is interest in high speed, but at the same time it is tempered by the fact that by and large, consumers still feel it is still too expensive to make the switch," Marcheck says.
While some might think broadband access might be dragged down by the recent dieoff among DSL providers, it is part of a natural evolution, the analysts say.
"The thing you have to take into consideration is that the technology is a year-and-a-half old by now," Marcheck says. "The problems we are seeing right now are fairly normal and fairly natural, to be expected."
Indeed, Strategis projections indicate while DSL won't overtake cable modem, it will keep pace. "But as part of the pie the RBOCs are by and large the ones supplying residential DSL service and they will be able to keep up with the demand," says fellow Strategis analyst Keith Kennebeck.
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