February 17, 2009

Dial-Up Gets Boost From The Recession

Lightning quick internet access seems to be the way of the future, but in the present, economic woes are causing some people to stick with dial-up.

Over the past decade, Internet providers have seen dial-up users steadily decline, but with a recession at hand, companies see an opportunity to successfully continue the service as a low-budget option.

"Dial-up is declining overall, but that doesn't mean it's not still a viable business," said Kevin Brand, vice president of product management at EarthLink Inc.

"There's still a big market out there and during these tough times, even customers who have bundles including broadband may be looking at their bill and thinking, 'Do I really need all this?'"

Recently EarthLink undercut competitors by $2 when it rolled out a dial-up offer of $7.95 a month.

The action is striking considering the market is one that many consumers have fled.

According to study conducted by the Pew Internet & American Life Project last year, only 9 percent of Americans were still using dial-up.

Time Warners' AOL once boasted 27 million dial-up users on its service, but that number has now dwindled to 6.9 million.

United Online, which offers dial-up for $9.95 a month through its Juno and NetZero services, has taken on a similar approach as EarthLink, although they haven't said whether they will match the company's price.

"The economy is tough," says United Online Chief Executive Mark Goldston in a new TV commercial.  In the ad, Goldston claims that the 56 million American homes with broadband could save $16 billion a year by switching to NetZero's dial-up service.

"It comes down to the need for speed or the need to save," he says.

According to Pew, the average monthly bill for people using broadband in 2008 was $34.50 a month.

A person switching to NetZero dial-up would save nearly $300 in a year.

Although dial-up is cheaper, it's not likely to make large gains against broadband.

According to Jim Friedland, analyst for Cowen & Co, dial-up may be sufficient for checking email or reading news, but people are seeking broadband style features, like streaming video, more than ever.

Friedland estimates that dial-up will be all but gone within six years.

Chuck Hester, a dial-up user near Little Rock, says broadband options are too pricey, but remains frustrated with the limitations of a slower Internet connection.

"Dial-up "” it stinks. All the pages that are being written for the Internet now are moving to more and more graphics, more and more pictures, more and more movies," he said in an interview with the Associated Press. "With dial-up, you can forget about it."

Even with the benefits of faster services, high monthly bills are under heavy scrutiny.

According to Pew, 35 percent of those using dial-up said the faster service was too expensive for them.

EarthLink continues to see its number of dial-up users decline, but at a rate much slower than previous years, says Mike Crawford, analyst for B. Riley & Co.

"We're seeing increased demand for low-cost Internet, where a few years ago, everyone was looking to go to high-speed bundle packages," Crawford said. "I think this market is going to exist longer than most people realize."


On the Net: