Users cool on paying for 'dumb pipe' broadband
Feb 13, 2002
Despite a mixed record of success, people are willing to pay for high-speed Internet services, but selling access to a "dumb pipe" might not be the way to go, according to a survey to be released today.
The survey finds that American consumers are willing to pony up a total of $25 billion annually for the services, with the biggest share of that going to purchase various entertainment products.
In a survey of a representative sample of 600 U.S. consumers by Sage Research for Cisco Systems, 44% were willing to pay for entertainment products delivered via broadband networks including cable, DSL and wireless. The survey found that 42% were willing to pay for communications services and 39% for education over broadband networks.
Of the entertainment services that consumers are most willing to pay for, movies-on-demand heads the list, with 18% of those surveyed saying they were willing to pay about $5 a movie. Concerts or cultural events were second, with 15% willing to pay about $5 an event. TV shows-on-demand came in third, with 13% willing to pay $5 a show.
Sage Research president Kathryn Korostoff said that while people are expressing a willingness to pay for products, they have a problem paying for the delivery system.
"The dumb pipe has been a hurdle people have struggled with," she said. "What this says is there is an opportunity for content. Maybe the model is more like selling razor blades: Gillette did not make a fortune charging for the handle; they made money selling the blades. Maybe companies should charge for things people value and give away the pipe for free."
Cisco, which stands to benefit from expanded broadband use, hopes the survey will contribute to its drive to get a super-high-speed Internet under construction.
"The willingness of U.S. consumers to pay for services that broadband can deliver presents a challenge and an opportunity," said Laura Ipsen, vp worldwide government affairs at Cisco. "Consumers must have true broadband of 1.5 Mbps and above to achieve the real benefits of these emerging multimedia applications. Today, home U.S. broadband is about at 256 Kbps. Speeds of at least five times greater than that are going to be required for an enjoyable consumer experience."
&summary=Article%20about%20Users cool on paying for 'dumb pipe' broadbandThe survey finds that American consumers are willing to pony up a total of $25 billion annually for the services, with the biggest share of that going to purchase various entertainment products.
In a survey of a representative sample of 600 U.S. consumers by Sage Research for Cisco Systems, 44% were willing to pay for entertainment products delivered via broadband networks including cable, DSL and wireless. The survey found that 42% were willing to pay for communications services and 39% for education over broadband networks.
Of the entertainment services that consumers are most willing to pay for, movies-on-demand heads the list, with 18% of those surveyed saying they were willing to pay about $5 a movie. Concerts or cultural events were second, with 15% willing to pay about $5 an event. TV shows-on-demand came in third, with 13% willing to pay $5 a show.
Sage Research president Kathryn Korostoff said that while people are expressing a willingness to pay for products, they have a problem paying for the delivery system.
"The dumb pipe has been a hurdle people have struggled with," she said. "What this says is there is an opportunity for content. Maybe the model is more like selling razor blades: Gillette did not make a fortune charging for the handle; they made money selling the blades. Maybe companies should charge for things people value and give away the pipe for free."
Cisco, which stands to benefit from expanded broadband use, hopes the survey will contribute to its drive to get a super-high-speed Internet under construction.
"The willingness of U.S. consumers to pay for services that broadband can deliver presents a challenge and an opportunity," said Laura Ipsen, vp worldwide government affairs at Cisco. "Consumers must have true broadband of 1.5 Mbps and above to achieve the real benefits of these emerging multimedia applications. Today, home U.S. broadband is about at 256 Kbps. Speeds of at least five times greater than that are going to be required for an enjoyable consumer experience."
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