At the end of 2006, more than 100 million households in the United States subscribed to Internet services, cable or satellite television and other telecommunications services. By 2012, the number of new subscribers will increase by some 50 million households.
As the technology behind Internet, pay TV and telecommunications services improves, the variety of available choices for consumers also expands and could leave even veteran users of these services scratching their heads in confusion.Part 1 of this two-part series will examine the growing variety of Internet services available to consumers.
A Growing Base
“There’s a lot of room for growth here,” Doug Williams, a JupiterResearch analyst, told TechNewsWorld. “There’re a lot of people who do not have these services who are going to get them in the coming years and there are a lot of moving parts.”
For consumers, the decision is no longer simply between cable or satellite, dial-up or DSL (digital subscriber line). Now, consumers have several options in terms of their high-speed broadband Internet connections, television and phone services, from traditional cable and satellite to cutting-edge new technologies such as fiber-optic services (FiOS), Voice over IP (VoIP) and Internet Protocol Television (IPTV).
Adding to the cacophony of different broadband service choices, many telecommunication and cable companies have bundled their services and rolled out so-called triple play packages in addition to their a la carte services. With the glut of options currently on the market, prospective subscribers should carefully weigh the pros and cons of each service based on their household’s needs for digital television, Internet services and VoIP.
“A lot of consumers are already subscribing to some of these services,” Williams explained. “Most of them already have voice service. Most of them have wireless service and have broadband service at this time. The option of the bundle tends to drive prices for services if the consumer subscribes to more than one.”
The decision also depends on which providers are available to consumers, Michelle Abraham, an InStat analyst, told TechNewsWorld. “A lot of it really depends on the individual provider,” she explained. “If you have AT&T and not Verizon, that makes a difference in the services they are operating.
“All cable operators are not the same, and some may be doing more than others,” she added.
Picking a Lane
Some 44 percent of total U.S. households have high-speed broadband Internet service, according to Williams, and of those households already online, roughly 60 percent have the service. In the next five years, research indicates that number will increase by 10 percent. As those potential subscribers shop around for the right plan, they should keep two things in mind: price and speed.
“We see that number growing to 70 percent by 2012. If they are looking at subscribing for service, then the two main things they will be looking at are the price point and the speed tier. Those are what we have identified as the two critical factors,” he noted.
Preferences for speed, Williams pointed out, are basically dependent on personal choice. For consumers who are not online yet or are frustrated with their dial-up service, anything will be an improvement. However, there are clear choices for service in the market today.
DSL providers in general offer speeds ranging from the 768 kbps for US$15 per month at the low end to maximum speeds between 3 to 6 mbps (megabits per second) in certain markets. Cable modem operators by and large provide higher speeds. Their faster Internet service comes with a higher price as well. The low side of high-speed Internet via a local cable operator ranges from 3 to 5 mbps.
“Some cable operators are offering speeds of 15 to 30 mbps, which is up to five to 10 times faster than some of the DSL offerings provided by the telecommunications carriers,” Williams noted.
The caveat for cable operators, however, is that the service is shared by neighborhoods. The result for users of a shared network could be noticeably slower speeds during high traffic periods, for instance after school, work or dinner and before bedtime. DSL and other high-speed Internet providers do not have this shared component.
“Yes, [users could experience slower speeds]. The advertised speed is not always the speed you get,” Williams acknowledged. “That’s true with any service provided to consumers. It is true that it can degrade the speed for the connection, but in my view of the market, that has not been a significant enough of an issue to cause people to not chose cable modem service.”
Sharing the Trunk
Aside from potentially slower service, Williams said there is no noticeable difference between DSL and cable modem Internet service. “If you compared a 3 meg DSL versus a 3 meg cable modem, the consumer should not see a discernible difference between those two. There may be a difference on the bill, but those services should act the same from an end-user point of view, and in particular for a price they can afford.”
While cable operators boast about having faster service, they often cannot deliver those speeds around the clock due to their network design, in which hundreds of customers share a data trunk, Jim Smith, a Verizon spokesperson, told TechNewsWorld.”If [all customers on the data trunk] use it at once, it slows,” he said.
“DSL is a dedicated circuit that’s all yours; only the Internet or your own computer can slow it down. Satellite … is a great option for those so far away from town that there is no DSL remote terminal nearby to connect them to and no CATV (cable television) company running cable that far out,” he explained.
Other Internet Options
Cable modem operators have a slight edge in the market, with some 57 percent, while DSL comes in a close second with 41 percent of consumer broadband connections, according to Williams’ research. The remaining users have opted for service with satellite, fiber-optic providers, broadband over powerline (BPl) and fixed wireless.
“Those are very small niche markets. They are looking for ways to penetrate the mass market but they have been unable to thus far,” Williams stated.
Satellite service is marketed to users who have no other option for broadband because they live in a more rural area. It provides slower connection speeds than DSL or cable providers. Additionally, its price tag is generally higher than DSL or cable, Williams explained.
“I don’t know what it tops out at, but it is definitely more limited. Similarly, there seems to be a higher price for satellite service,” he said.
The FiOS Factor
As with most technology providers in the digital age, telecommunications companies have not been content to rest on their laurels. At Verizon, engineers have been busily developing what the company calls FiOS, or fiber to the premises (FTTP) telecommunications services. Verizon is the first major U.S. telecommunications company to bring fiber all the way to the home.
AT&T is also in the process of switching to fiber optics, bringing it into their distribution network, but the company is not bringing it quite as far as Verizon, Williams noted.
In lieu of copper wires, FiOS services use fiber-optic cables, which transmit laser-generated pulses of light over glass fiber cables no thicker than a human hair. Residential and business customers benefit because they are now directly linked to Verizon’s network.
“The main thing with the fiber all the way to the home,” InStat’s Abraham pointed out, “is that they can get higher speeds. Verizon offers 15 megabits or 30 megabits, and that’s downstream to the home. But they can also offer higher speeds upstream. So that if you upload a lot of content, you might be interested in quicker upstream speeds.”
Gamers or those who do a lot of video editing at home and send files to friends and relatives or upload to YouTube would be most affected by quicker upstream speeds, Abraham explained.
The technology has a virtually unlimited capacity for both data and video, as well as 5.1 channel calling, according to Smith. It is also reliable, impervious to water and has been engineered so that no more than 32 customers share a “trunk,” or hub. That translates into less competition with one’s neighbors for bandwidth, he added.
FiOS is available in communities in 13 states, including Pennsylvania, Delaware, Maryland, Virginia, Massachusetts, Rhode Island, California, Texas, Indiana and Oregon. Consumers generally experience common speeds between 5 mbps and 30 mbps with FiOS Internet service. However, in certain markets the connection speed can range from as low as 5 mbps to 50 mbps.
“We have 50 mbps FiOS in some markets, 30 [mbps] full time in others and are working at 100 mbps soon,” Smith noted.
Pricing for FiOS is based upon the maximum connection speed. With a one-year service agreement, subscribers will pay $39.99 for up to 5 mbps; $49.99 for up to 15 mbps; and $179.95 for up to 30 mbps. Installation, for now, is free.
Without a contract, pricing is $47.99 for 5 mbps; $57.99 for 15 mbps; and $199.95 for 30 mbps. Users will also pay a $69.99 installation fee. Contract or no contract, all subscribers will also have a one-time activation fee of $19.99.
As with most broadband service providers, Verizon offers several bundles that include the company’s standard Freedom Essential calling plan with FiOS Internet, or a three-service bundle incorporating FiOS TV where available. Monthly savings for these service packages range from $5 to $25 on two-service bundles and $13 to $43 on three-service bundles. The catch, however, is that users must sign either a 12-month or 24-month contract.
“Verizon’s FiOS-based service, it tops out at 30 mbps, but it comes with a price tag of $179. That’s technically a consumer service, but it’s not something a lot of consumers will find capacity for in their budget,” JupiterResearch’s Williams said.