1.1 The Issues 1

1.2 Methodology 5

1.3 Scope of Report 6

2.1 Why Consumers Want Broadband 8

2.1.1 Potential Applications Using Broadband 9

2.1.2 Residential Computer Usage 12

2.1.3 Internet and Multimedia Applications Create Need for Broadband Services 14

2.1.4 Cable Broadband Service 17

2.2 Projecting Demand for High-Speed Access 18

2.2.1 Size of Consumer Broadband Market 19

2.2.1.1 How Many People Are Online, Anyway 20

2.2.2 Types of Households Purchasing Broadband Services 21

2.2.3 Understanding the Internet’s Rapid Growth 22

2.3 Broadband Technologies 24

2.4 Broadband Technologies 27

2.4.1 Broadband Wireline Technologies 27

2.4.1.1 DSL Technologies 27

2.4.1.2 ISDN 28

2.4.1.3 Cable Modems & HFC Cable 28

2.4.2 Broadband Wireless Technologies 31

2.4.3 Consumer Satellite Services 32

3.1 Consumer Demand for Applications and Content 33

3.1.1 IP Telephony 33

3.1.1.1 Video Conferencing Over the Internet 35

3.1.1.2 Audio and Video over the Internet 35

3.1.2 Interactive Television 37

3.1.3 HDTV 39

3.2 Consumers Online 41

3.2.1 Work-at-Home Requirements 42

3.2.2 Children Online 43

3.3 Leading Consumer Sectors for the Broadband Market 44

3.3.1 Home Shopping 44

3.3.1.1 Buying Clothing from the Web 49

3.3.1.2 Buying Music from the Web 50

3.3.1.3 Buying Publications Electronically 52

3.3.1.4 Buying Greeting Cards from the Web 54

3.3.2 Online Financial Services 54

3.3.3 Consumer Travel 56

3.3.4 City Guides 57

3.3.5 Online Classified Advertisements 58

3.3.6 Adult Entertainment 59

3.3.7 Sports 60

3.3.8 Interactive Gaming 62

3.3.9 Gambling 63

3.3.9.1 Internet Casinos 64

3.3.9.2 Horse Wagering 65

3.3.9.3 Sports Wagering 66

3.3.9.4 Lotteries 67

3.4 Leading Content Providers for Consumers 67

3.4.1 America Online, Inc. 68

3.4.2 Yahoo! Inc. 70

3.4.3 Excite, Inc. 71

4.1 Introduction: The Development of Broadband Networks 73

4.1.1 Cable Alternatives To Copper Wiring 74

4.1.2 Alternative Wireless Technologies 75

4.2 High-Speed Wireline Telco Technologies 76

4.2.1 Digital Subscriber Line - xDSL 76

4.2.1.1 Constraints on xDSL Technology 77

4.2.1.2 Central Office/Customer Premises Equipment for xDSL 82

4.2.1.3 ADSL 83

4.2.1.4 ADSL Lite 85

4.2.1.5 RADSL 87

4.2.1.6 HDSL 87

4.2.1.7 IDSL 88

4.2.1.8 xDSL Trials by Telcos 89

4.2.2 ISDN 91

4.2.2.1 Consumer ISDN Technology 91

4.2.2.2 Bumpy Road to ISDN 93

4.2.2.3 ISDN Prices 94

4.3 High-Speed Wireline Cable Technologies 96

4.3.1 Upgrades of the Cable Plant 97

4.3.1.1 Solutions to Future Congestion 98

4.3.1.2 Cableco Upgrades 98

4.3.1.3 Hybrid Fiber Coaxial Cable 100

4.3.1.4 Spread Spectrum 101

4.3.2 Set Top Boxes 102

4.3.3 Cable Modems 103

4.3.3.1 Adoption of Cable Modems 103

4.3.3.2 Demand for Cable Modems Exceeds Supply in 1998 105

4.3.4 Digital Set Top and Cable Modem Standards 105

4.3.4.1 Open Cable Initiative 106

4.3.4.2 MCNS-DOCSIS 107

4.3.4.3 Other Broadband Cable Standards 107

4.3.5 Pricing of Broadband Cable Services 108

4.4 Terrestrial High-Speed Wireless Distribution 108

4.4.1 Advantages of Broadband Wireless Over Wireline Services 110

4.4.2 LMDS 110

4.4.3 MMDS and Other Wireless Cable Services 112

4.4.3.1 Digital MMDS 114

4.5 Direct-to-Home Terrestrial Satellite Distribution Systems 115

4.5.1 DBS Equipment 115

4.5.1.1 DBS Transmission 116

4.5.1.2 DBS Programming 117

5.1 Service Providers & Their Offerings 119

5.1.1 @Home – Broadband Service Provider for Consumers 119

5.1.1.1 @Home’s Content for Consumers 121

5.1.1.2 Merger Talks and Mergers 123

5.1.2 RoadRunner—MediaOne 124

5.1.2.1 RoadRunner’s Merger with MediaOne 125

5.1.3 AOL’s Broadband Services 126

5.1.3.1 AOL’s Agreements with Content Providers 128

5.1.4 RBOCs’ Internet Access Services 129

5.1.4.1 Ameritech.net – A Leading Example 129

5.1.5 AT&T WorldNet – Internet Service 130

5.1.6 MCI’s Broadband Service for Consumers 131

5.1.7 GTE’s Web-based E-Mail 132

5.1.8 Satellite Broadband Providers 132

5.1.8.1 DirecTV and USSB 132

5.1.8.2 PrimeStar 133

5.1.8.3 EchoStar 134

5.1.8.4 DirecPC 136

5.1.8.5 CyberStar 138

5.2 Vendor Profiles 139

5.2.1 Aware, Inc. 139

5.2.2 Cisco Systems, Inc. 140

5.2.2.1 Routers and Networking 141

5.2.2.2 Cisco Pursues Cable Modems & ADSL 142

5.2.2.3 Partnerships, Mergers, & Agreements 142

5.2.3 General Instrument Corp. 143

5.2.3.1 Agreements, Deals, and Partnerships 145

5.2.3.2 General Instrument’s Products 147

5.2.4 Lucent Technologies, Inc. 149

5.2.4.1 New Internet Products 150

5.2.5 Microsoft Corp. 153

5.2.6 Motorola, Inc. 153

5.2.6.1 Agreements & Alliances 154

5.2.6.2 Products 155

5.2.7 PairGain Technologies, Inc. 155

5.2.8 Paradyne Corporation 157

5.2.9 Scientific-Atlanta, Inc. 158

5.2.9.1 Two-way, Digital Cable Modems 160

5.2.10 Sony Corporation 161

5.2.11 Tele-Communications, Inc. 162

5.2.11.1 Headend in the Sky 163

5.2.11.2 Agreements with Set Top Box Developers 164

6.1 Description of Study 167

6.1.1 Segmentation Covers all US Households 167

6.2 Analysis Based on Basic Characteristics of Consumers 169

6.2.1 Gender 169

6.2.2 Race 171

6.2.3 Age 174

6.2.4 Marital Status 177

6.2.5 Level of Education 179

6.2.6 Employment Status 181

6.2.7 Income Level 184

6.3 Analysis Based on Characteristics of Household 187

6.3.1 Household Size 187

6.3.2 Presence of Children 189

6.3.3 Region 192

6.3.3.1 Location in a Metropolitan Area 194

7.1 Introduction 197

7.2 Forces Driving Demand Forecasts for Internet Access 197

7.2.1 Model 198

7.2.2 Assumptions 200

7.3 Two Possible Scenarios 202

7.3.1 Overall Demand 202

7.3.2 A Possible Growth Scenario: Cable Catches On Quickly 204

7.3.3 Another Growth Scenario: xDSL Catches On Quickly, Scenario #2 208

7.4 US Broadband Revenue from Consumer Services 211

7.5 The Future of Broadband 214

7.5.1 xDSL Service Rollout 215

7.5.1.1 Marketing xDSL 216

7.5.1.2 Need for xDSL Standardization 217

List of Questions 218

I-1 US Consumer Telecommunications and CATV Services Revenue, 1998-2003

($Billions) 3

I-2 US Consumer Telecom Revenue from Various Broadband Technologies, 1998-2003 ($Billions) 4

II-2 Portion of US Consumer Video and Music Market that Broadband Applications

Will Capture, 1998 and 2003 ($Billions) 11

II-3 Portion of US Consumer Interactive Digital Media Market that Broadband Applications Will Capture, 1998 and 2003 ($Billions) 12

II-4 Penetration of US Households by PCs, 1998-2003 (Millions) 13

II-5 Growth of US Households with PCs and Households Online, 1998-2003 (Millions) 14

II-6 Time Needed to Download 12 Meg/3.5 Minute Video Clip (Logarithmic Scale) 16

II-7 Number of Internet Subscribers by Provider, 1998 (Thousands) 20

II-8 Internet Subscribers by Income and Age, 1998 22

II-9 Diffusion Rates of Selected Technologies 23

II-10 Growth of Internet Hosts, 1994-1998 (Thousands) 24

II-11 Installations of New Lines Worldwide, 1997 and 2000 (Millions) 26

II-12 Market Share of Penetration of Broadband Technologies in 1998 and 2003 27

II-13 Percent of US Population Subscribing to Cable Television, 1994-2003 29

III-2 Projected Growth of E-retailing By Category, 1996 and 1997 ($Millions) 47

III-3 Online Clothing Purchases, 1998-2002 ($Millions) 49

III-4 Comparison of the Number of Online Music Households and Revenue from Online Music, 1997-2002 51

IV-2 MMDS Network Architecture 113

V-2 ISP Market Share, 1998 126

V-3 US DBS Market Share, 1998 133

VI-2 PC Penetration, by Gender, 1998 170

VI-3 Broadband Technology Expected to Own Soon, by Gender, 1998 170

VI-4 Penetration of Present and Future Broadband Technologies by Gender, 1998 171

VI-5 PC Penetration, by Race, 1998 172

VI-6 Broadband Technology Expected to Own Soon, by Race, 1998 173

VI-7 Penetration of Present and Future Broadband Technologies by Race, 1998 174

VI-8 PC Penetration, by Age, 1998 175

VI-9 Broadband Technology Expected to Own Soon, by Age, 1998 176

VI-10 Penetration of Present and Future Broadband Technologies by Age, 1998 176

VI-11 PC Penetration, by Marital Status, 1998 178

VI-12 Broadband Technology Expected to Own Soon, by Marital Status, 1998 178

VI-13 Penetration of Present and Future Broadband Technologies by Marital Status, 1998 179

VI-14 PC Penetration, by Level of Education, 1998 180

VI-15 Broadband Technology Expected to Own Soon, by Level of Education, 1998 181

VI-16 Penetration of Present and Future Broadband Technologies by Level of

Education, 1998 181

VI-17 PC Penetration, by Employment Status, 1998 182

VI-18 Broadband Technology Expected to Own Soon, by Employment Status,

1998 183

VI-19 Penetration of Present and Future Broadband Technologies by Employment

Status, 1998 183

VI-20 PC Penetration, by Income Level, 1998 185

VI-21 Broadband Technology Expected to Own Soon, by Income Level, 1998 185

VI-22 Penetration of Present and Future Broadband Technologies by Income Level,

1998 186

VI-23 PC Penetration, by Household Size, 1998 188

VI-24 Broadband Technology Expected to Own Soon, by Household Size, 1998 188

VI-25 Penetration of Present and Future Broadband Technologies by Household Size, 1998 189

VI-26 PC Penetration, by Presence of Children, 1998 190

VI-27 Broadband Technology Expected to Own Soon, by Presence of Children, 1998 191

VI-28 Penetration of Present and Future Broadband Technologies by Whether

Children Reside in Household, 1998 191

VI-29 PC Penetration, by Geographic Region, 1998 192

VI-30 Broadband Technology Expected to Own Soon, by Geographic Region, 1998 193

VI-31 Penetration of Present and Future Broadband Technologies by Geographic

Region, 1998 194

VI-32 PC Penetration, by Location in Metropolitan Area, 1998 195

VI-33 Broadband Technology Expected to Own Soon, by Location in Metropolitan

Area, 1998 196

VI-34 Penetration of Present and Future Broadband Technologies by Location in Metropolitan or Non-Metropolitan Area, 1998 196

VII-1 Share of Internet Access Using Various Types of Modems, 1997-2003 203

VII-2 Market Share of Various Types of Internet Access, 1997 and 2003 204

VII-3 Share of Internet Access Using Various Types of Modems If Cable Catches On Quickly, 1997-2003 206

VII-4 Market Share of Various Types of Internet Access If Cable Catches On Quickly, 1997 and 2003 206

VII-5 Consumer Expenditures for Internet Access If Cable Catches On Quickly,

1997-2003 ($Millions) 207

VII-6 Consumer Expenditures for Internet Access If Cable Catches On Quickly, by Broadband Technology, 1997-2003 ($Millions) 207

VII-7 Share of Internet Access Using Various Types of Modems If xDSL Catches On, 1997-2003 209

VII-8 Market Share of Various Types of Internet Access If xDSL Catches On, 1997

and 2003 210

VII-9 Consumer Expenditures for Internet Access If xDSL Catches On, 1997-2003 ($Millions) 211

VII-10 Consumer Expenditures for Internet Access If xDSL Catches On, by Broadband Technology, 1997-2003 ($Millions) 211

VII-11 US Consumer Telecommunications and CATV Services Revenue, 1998-2003 ($Billions) 213

VII-12 US Consumer Telecom Revenue from Broadband Technologies, 1998-2003 ($Billions) 213

II-1 US Revenue from Existing and Potential Consumer Applications that Require Broadband Technology, 1998-2003 ($Billions) 10

II-2 PC and Online Penetration of US Households, 1998-2003 (Millions) 13

II-3 Time Needed to Download 12 Meg/3.5 Minute Video Clip 15

III-2 Most Frequently Visited Web Sites, 1998 (Millions) 42

III-3 Projected Growth of E-retailing By Category, 1996 and 1997 ($Millions) 46

III-4 Most Popular Retail Sites on the Web, 1998 (Millions) 48

III-5 Forecast of Online Music Purchases, 1998-2003 50

III-6 Web Sites of Travel Companies (Millions) 57

III-7 Web Sports Sites, 1998 61

VI-2 Selected Consumer Technology Penetration Relating to Broadband Needs by

Race, 1998 172

VI-3 Selected Consumer Technology Penetration Relating to Broadband Needs by Age Group, 1998 175

VI-4 Selected Consumer Technology Penetration Relating to Broadband Needs, by Marital Status, 1998 177

VI-5 Selected Consumer Technology Penetration Relating to Broadband Needs, by

Level of Education, 1998 180

VI-6 Selected Consumer Technology Penetration Relating to Broadband Needs, by Employment Status, 1998 182

VI-7 Penetration of Selected Consumer Technologies Related to Broadband, by Income Group, 1998 184

VI-8 Selected Consumer Technology Penetration Relating to Broadband Needs, by Household Size, 1998 187

VI-9 Selected Consumer Technology Penetration Relating to Broadband Needs, by Presence of Children, 1998 190

VI-10 Selected Consumer Technology Penetration Relating to Broadband Needs, by Geographic Region, 1998 192

VI-11 Selected Consumer Technology Penetration Relating to Broadband Needs, by Location in Metropolitan Area, 1998 195

VII-2 Share of Internet Access Using Various Types of Modems If Cable Catches On Quickly, 1997-2003 205

VII-3 Consumer Expenditures for Internet Access If Cable Catches On Quickly,

1997-2003 ($Millions) 207

VII-4 Share of Internet Access Using Various Types of Modems If xDSL Catches On, 1997-2003 209

VII-5 Consumer Expenditures for Internet Access Using xDSL If xDSL Catches On,

1997-2003 ($Millions) 210

VII-6 US Consumer Telecommunications and CATV Services Revenue, 1998-2003 ($Billions) 212