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Customers at the Gate: Broadband Applications and Services Highly Sought by Consumers

Potential Demand for Internet-delivered Services Sized at $25 billion

Release: "Customers at the Gate": Broadband Applications and Services Highly Sought Study: Customers At the Gate Related articles: A National Imperative: Broadband Everywhere by 2010 Related links: Cisco Broadband Public Policy

By John Earnhardt, Cisco Systems

February 13, 2002

The first comprehensive survey of Internet-delivered services that US households want, conducted by Sage Research, Inc. and commissioned by Cisco Systems, Inc., reveals that many consumers are willing to pay for education, entertainment and communications services that high-speed, always-on broadband connections can deliver.

Released today, the study titled "Customers at the Gate: Mounting Demand for Broadband-enabled Services" found that 44 percent of U.S. households are willing to pay for entertainment services, 42 percent for communications services, and 39 percent for education services.

"While our hypothesis going into the research was that we would find demand for a variety of entertainment, education, and communications-related services," said Kathryn Korostoff, Sage's President. "Even we were astounded by how many households reported willingness to pay."

The research shows that many of the services with broadest appeal are those most likely to have a high degree of multimedia content. For example, 15 percent of US households would pay for continuing education delivered over the Internet. Continuing education would typically include video lectures and discussions and even application sharing that would, for example, simulate a classroom or study group environment.

As its top public policy goal, Cisco has pursued the widespread adoption and deployment of broadband worldwide. The adoption of broadband contributes to worker productivity and company efficiency and can be directly tied to a nation's gross domestic product (GDP) growth.

"The willingness of U.S. consumers to pay for services that broadband can deliver presents a challenge and an opportunity," according to Laura Ipsen, vice president of Cisco Systems, Worldwide Government Affairs. "Consumers must have true broadband of 1.5 megabits per second (Mbps) and above to achieve the real benefits of these emerging multimedia applications," Ipsen said referring to such applications as e-learning, videos-on-demand and video-conferencing.

According to accepted data, most U.S. Internet users operate using dial-up and only 10% have DSL or cable. "Today, home U.S. broadband is about at 256 kilobits per second (Kbps)," said Ipsen. "Speeds of at least five times greater than that are going to be required for an enjoyable consumer experience."Cisco, in a consortia led by TechNet (www.technet.org), recently announced its U.S. Broadband 2010 strategy. By 2004, an interim goal of 6Mbps per household was sought, with 100Mbps to 100 million homes the stretch goal to be reached by 2010.

In addition to identifying which services US households are willing to pay for, the study also examines how much they are willing to pay per service. For example, the study found that the most common price consumers are willing to pay for an Internet-delivered unified messaging service is $10 per month. As another example, the most common price consumers are willing to pay for Internet-delivered movies on demand is $5 per movie. The calculation of a $25 billion annual potential is estimated based on the percent of households likely to buy each service multiplied by the most common price they are willing to pay.

For this study, 600 US households were surveyed. The sample was designed to ensure the results would be representative of average US households based on actual US census data.

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