Natick, MA - February 13, 2002 -The first comprehensive survey of Internet-delivered services that US households want, conducted by Sage Research, Inc., reveals that many consumers are willing to pay for education, entertainment and communications services that high-speed, always-on broadband connections can deliver. The study, "Customers at the Gate: Mounting Demand for Broadband-enabled Services," found that 44% of U.S. households are willing to pay for entertainment services, 42% for communications services, and 39% 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."
When US households were asked to report how much-if anything-they would be willing to pay for a wide variety of broadband-delivered services (such as long distance telephony, unified messaging, continuing education, and movies on demand), many reported interest in more than one type of service.
The research also shows that many of the services with broadest appeal are those most likely to have a high degree of multimedia content. For example, 15% of US households would pay for continuing education. Delivered over the Internet, continuing education would typically include video (for example, lectures) and even application sharing (for example, to simulate a classroom or study group environment).
"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 Mbs 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 Kbps," said Ipsen. "Speeds of at least five times greater than that are going to be required for an enjoyable consumer experience."
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.
"The amount people are willing to pay for Internet-delivered services is really quite reasonable in most cases," said Korostoff. "That said, for some services, the amount they are willing to pay is less than for non-Internet alternatives." For example, the amount most are willing to spend per college credit for an online continuing education class is $50-certainly less than what they would pay at a conventional college.
The challenge this creates is that to build a sustainable business model, some services would need to be provided on a volume basis. Since most of these services, such as continuing education, require broadband access for a satisfactory customer experience, building such a volume will be difficult. Until broadband access is widely available to US households, the number of potential customers for these services will be limited.
For this groundbreaking study, commissioned by Cisco Systems, Inc., 600 US households were surveyed. The sample was carefully designed to ensure the results would be representative of average US households based on actual US census data. The complete results are available in a white paper (www.sageresearch.com/broadband.pdf), which also details the research methodology.
The specific service concepts tested within each of seven general categories were:
- Entertainment including simulation games, kids activity site, TV show simulations, music libraries, online gambling, TV shows on demand, movies on demand, concerts, and cultural events.
- Communications including videoconferencing, unified messaging for personal purposes, and international long distance/telephone.
- Education including language education, music education, cooking education, continuing education, and multimedia encyclopedias.
- Medical/health including video monitoring of child's daycare, video monitoring of older relative's care facility, and home health monitoring.
- Hobbies including interior decorating services, multimedia sports fan service, multimedia cooking lovers service, multimedia fitness enthusiasts service, and access to religious services/resources.
- Personal/professional Services including online clothes shopping service, counseling/psychiatric services, legal advice, marriage/parenting advice, home/auto care advice, multimedia travel planning, investment advice, online dating service, and online photo editing/printing/storage service.
- Telework/work including access to employer's network and unified messaging for work purposes.
About Sage Research
Sage Research, Inc. is a full-service market research firm providing demand-side research on information technology markets. The firm combines expertise in both qualitative and quantitative research methods with an in-depth knowledge of technology markets. Since 1993, Sage Research has delivered reliable data, insightful analysis, and actionable recommendations to industry leaders and innovative start-ups. For more information, visit www.sageresearch.com.
