Broadband Prices Too High for Many U.S. Consumers, Firm Reports

Online staff -- Electronic News, 3/23/2004

U.S. consumers continue to watch their pennies when it comes to high-speed Internet.

According to a report today from the Yankee Group, while interest in broadband is still growing, dial-up consumers remain highly price-sensitive. Only 17 percent of consumers say they are likely to subscribe to broadband at $45 per month, the firm found.

"Seventy-one percent of Internet customers claim they would switch to broadband if it were available at a lower price," Patrick Mahoney, Yankee's consumer technologies and services analyst, said in a statement. "Based on these responses, it appears DSL providers are hitting the vital price point. In addition, tiered services continue to be attractive to consumers, with 43 percent of dial-up households more likely to subscribe to broadband if they could choose a lower speed/lower priced package. This next generation of adopters is less concerned with connection speed than their predecessors and more interested in cost."

Based on the Yankee report, bundling will prove an effective strategy for targeting the secondary consumer market for broadband services.

"Thirty-one percent of broadband households chose their high-speed providers because of bundled discounts for multiple services. Bundling allows providers to lower the monthly price of broadband without sacrificing subscriber profitability because of higher revenue per customer and lower churn," Mahoney said.