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Broadband access surges
November 1, 2000: 3:42 p.m. ET

High-speed data lines increase by 57 percent in first half of 2000
By Staff Writer David Kleinbard
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NEW YORK (CNNfn) - The Federal Communications Commission issued a report Wednesday saying that high-speed lines connecting homes and small businesses to the Internet increased by 57 percent during the first half of 2000.

High-speed access rose to 4.3 million lines, or wireless channels, in service as of June 30, from 2.8 million at the end of 1999. The report shows that America's Web surfers have a "need for speed," and are willing to pay a premium over what standard dial-up Internet access costs to get it.

The most common means of providing high-speed Internet access to homes and small businesses are cable modems and Digital Subscriber Lines. DSL allows high-speed Internet access to be provided over standard twisted-pair copper telephone wires.

However, DSL is a distance-sensitive technology. End users need to be within 12,000 feet of a telephone company's central office to be able to use it. As a result, many homes can't get DSL Internet access.

Cable television companies are in the process of investing an estimated $14 billion to upgrade their networks to carry higher bandwidths and provide multiple services over a single cable connection. More than 90 percent of homes in the U.S. have access to cable lines, making cable modems an attractive means of offering high speed Internet access. The main drawback associated with cable modems is that transmission speed slows down as more users log onto the system in any given area.

FCC report's findings

The FCC's report is based on information that broadband Internet access providers file with the agency twice a year under a program that began in March 2000. Among the report's findings:

         About 2.8 million of high-speed lines provided speeds of over 200 kbps in both directions, and thus met the FCC's definition of advanced services, compared to 2.0 million at the end of 1999.

         The presence of high-speed service subscribers was reported in all 50 states, the District of Columbia, and Puerto Rico, and in about 70 percent of the nation's ZIP codes, compared with 59 percent at the end of 1999.

         High-speed asymmetric DSL (ADSL) lines in service increased by 157 percent, to almost one million lines, compared to about 370,000 lines at the end of 1999.

         High-speed lines in service over coaxial cable systems remained more numerous, increasing 59 percent to about 2.2 million lines, compared to 1.4 million at the end of 1999.

         High-speed lines (or wireless channels) delivered over fiber, satellite, fixed wireless, and wireline technologies other than ADSL increased by at least 18 percent during the first half of this year.

Dial-up still dominant

While broadband Internet access is growing rapidly, the vast majority of consumers continue to surf the Internet using dial-up connections that transmit data at a maximum of 56 kbps. Much of the growth in standard dial-up access is coming from companies that provide access free of charge, such as 1stUp.Net,, Juno Web, and Net Zero.

"Free Internet service providers fueled the tremendous growth in Internet access accounts in the second quarter and have reshuffled the lineup of the nation's largest consumer-oriented online service providers," said Amy Fickling, a managing editor at Telecommunications Reports International, a telecom news service based in Washington, D.C. "Most of the leading fee-based dial-up ISPs showed only single-digit percentages in their growth rates, if that."

Telecommunications Reports reported last August that about 58 million consumers accessed the Internet through a dial-up connection in the second quarter of this year. By contrast, 2.8 million accessed the Net through cable modems, 1.1 million through Internet TV, and 286,000 through DSL. Thus, cable modems and DSL combined accounted for only 5 percent of consumer access to the Internet in the second quarter.

Broadband providers benefit from growth

Companies that provide broadband access and make the hardware consumers and telephone companies use for high-speed access have benefited from the rapid growth of that market. Providing access through cable modems is dominated by two companies: Excite@Home (ATHM: Research, Estimates) and RoadRunner; together, they account for about 98 percent of the cable access market. AT&T became the owner of RoadRunner when it acquired MediaOne.

RoadRunner announced on Oct. 16 that it added 220,000 subscribers in the third quarter, bringing its total to more than 1.1 million. Excite@Home said last month that its residential broadband subscriber base grew to 2.3 million in the third quarter, up from 1.8 million at June 30, 2000. graphic

Broadcom (BRCM: Research, Estimates), a maker of chips and software for high-speed data transmission, has been perhaps the biggest beneficiary of the broadband revolution. Irvine, Calif.-based Broadcom is the dominant provider of chips for cable modems, cable television set-top boxes, and xDSL equipment. Its revenue exploded to $518 million in 1999 from just $42 million in 1997. This year, its third-quarter revenue reached a record $319 million, an increase of 129 percent from the $140 million reported in the third quarter of 1999. Its pro forma net income was a record $78.7 million, or 30 cents per share. graphic