Price Takes Over From Speed In Battle For Broadband Customers

Early adopters of broadband services tended to focus on the technological specifications of the platform – things such as upload and download speeds. However, as broadband moves further into the mainstream, price is becoming a more significant factor in consumers’ decisions over which services to subscribe to.

It is DSL operators that are benefitting from these shifts in consumer focus, as they have tended to concentrate on reducing prices whilst cable operators promote the speed of their network. A January 2003 survey from Forrester found that DSL and cable operators were already pushing price and speed respectively. Accordingly, it found that DSL subscribers were happier than their cable peers with price, but less satisfied with connection speed.

Cable operators have increased the speed of their downstream services to as much as 3 megabits per second (3 M/s), more than double the typical DSL offering. But the cable companies have not reduced their prices in step with DSL.

As Forrester points out, speed has its takers, with cable’s 31% growth this year just behind DSL’s 35%. However, the value placed on speed in the decision to take broadband is falling. Around 82% of those who bought broadband two years ago or earlier said speed was a key determinant; this has fallen to 72% for those taking the service in the last six months. On the same basis, the attraction of discount packages has risen from 20% to 43%.

Forrester has forecast that there will be 22 million broadband households in the US by the end of this year. Third quarter data from the major operators show that the figure is already slightly above 20 million; this is 32% higher than the year-end 2002 figure.