DSL Service to Take Hold in the U.S. SOHO Markets

Digital subscriber line (DSL) services finally are making inroads into the U.S. residential and small business markets. At year end 1998, approximately 50,000 DSL lines were installed in the U.S. residential and business markets, yet by mid-1999, that number had already more than tripled to 160,000, according to Framingham, MA-based International Data Corp. (IDC).

Despite expected falling prices for the service, DSL revenues will soar past $2 billion in both the residential and small business markets by as soon as 2003.

"The development of the DSL market will be closely tied with consumer and small business Internet adoption. Work-at-home Internet users as well as power users are quickly becoming frustrated with slow dial-up speeds, and small businesses with multiple users accessing the Internet are looking to upgrade their access," said Amy Harris, research analyst for IDC's Residential and Small Business Telecommunications Services programs. "However, growth of the DSL services market will also be impacted by competing technologies such as cable modems."

Residential market remains initial focus
So far, incumbent local exchange carriers (ILECs) have focused most of their marketing on the residential market in response to competition from cable operators and to relieve congestion in their voice networks. In the small business market, however, DSL service deployments are just getting under way with providers facing the dilemma that DSL will potentially cannibalize revenue from other high-speed services such as ISDN and leased lines.

Activity in the DSL market currently is fueled by the increase in the number of residential and small business customers as well as the growing number of players in the DSL market. "To successfully reach these users, DSL service providers must have an effective marketing strategy in place," Harris said. "DSL adoption hinges on service providers finding the right mix of service availability, pricing, and ease of use."

According to IDC, distribution strategies will play a key role in the growth of DSL in the consumer market. DSL installations traditionally require a visit to the customer's home or premise. Further complicating mass proliferation of DSL is the lack of consumer awareness about this technology as well as the need for consumer education about DSL installation.

IDC recently published two reports covering the DSL services market. Preparing for Liftoff: U.S. Residential DSL Market Assessment and Forecast, 1998-2003 (IDC #B20340) analyzes the use and potential use of DSL in the U.S. residential market. The report forecasts U.S. residential lines in service and service revenues through 2003. It discusses major trends and factors driving the market. U.S. Small Business DSL Services Market Assessment and Forecast, 1998-2003 (IDC #B20328) provides the same information for the small business market.

For more information or to order the reports, contact Janis Dempsey at 1-800-343-4952, ext. 4145 or at jdempsey@idc.com.