Dial-Up Business Resilient Despite Broadband Push
Despite a $7.2 billion federal investment in broadband deployment, dial-up Internet could play an important role for years to come, say analysts and industry insiders. The decline and disappearance of dial-up, which has been called inevitable for close to a decade, is taking much longer than many expected, and it could remain a viable business for several more years, they said.
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While dial-up subscribers are on the decline, that decline has begun to slow, said industry analysts. NetZero, for instance, which boasts 1.6 million dial-up subscribers, is expected to gain some 156,000 new subscribers next quarter while shedding about 251,000 subscribers, for a net loss of 75,000 subscribers, according to Mike Crawford, an analyst for B. Riley & Company who covers United Online, NetZero’s parent company. That loss in subscribers is far from the mass exodus that many expected. “United Online offers some basic Internet access at low price,” said Crawford. “That is good enough for a subset of the population.” Dial-up Internet should remain a viable business for NetZero for another 5 to 10 years, he said.
NetZero accounted for $257 million of United Online’s revenue, second only to FTD, an online flower delivery service the company acquired last year. Nationally, there are at least 10 million dial-up customers still around, according to a Pew study released last year.
“We see dial-up as having a long tail,” said Kevin Brand, senior vice president of product management at EarthLink, which earns about half of its revenue through dial-up subscriptions. “The rate of churn is actually diminishing as many that want to move [to broadband] have already moved.”
About half of EarthLink’s 1.5 million dial-up customers are in urban areas where broadband is available, said Brand. Additionally, only 14 percent of dial-up customers continue to use the service because broadband is unavailable, according to the Pew study.
Meanwhile, the slowed economy has helped make the case for dial-up Internet, offering a low-cost substitute for broadband. As result, EarthLink has seen a slight uptick in subscriptions, said Brand.
Even companies that expect to gain from the stimulus are encouraged by the dial-up market’s resilience. Level 3 Communications, which has a large fiber network that some expect to benefit from federal broadband funds and also provides network access for many dial-up providers, has been pleasantly surprised by the slowness of the decline, said Edward Morche, senior vice president of the federal markets group at Level 3. The company expected the dial-up revenue to quickly disappear, but that just has just not happened, he said.