High-speed Net use expected to explode by 2003

More than 27.3 million users worldwide are expected to use digital subscriber lines (DSL) by 2003, up from 70,000 last year, according to a report released today by market research firm International Data Corp.

That's good news for U.S. local phone companies and a handful of high-speed competitors. The phone firms have invested heavily in DSL, but encountered much criticism over high prices and slow deployment of the Net access technology.

DSL, a high-speed technology that transmits data over traditional telephone wires, also has been plagued by a service outages this year.

DSL and the telephone firms that are offering broadband services are competing with companies that provide high-speed Net access via cable modems. It's far from clear which broadband technology will become the preferred means of getting online--but it's practically certain the business will be lucrative.

Although estimates vary widely, most research firms have said there are currently more than 100,000 DSL users in the United States. An earlier IDC report puts the number at 160,000.

In the future, foreign markets are expected to be a large part of the high-speed Net technology's rising usage. The report found that Western Europe, where the percentage of DSL users is expected to jump to 34 percent by 2003 from 6 percent today, will see particularly strong demand for DSL. IDC expects many European businesses to convert to DSL from ISDN lines in late 2001, contributing to the area's strong growth forecast.

Overall, IDC expects about 13 percent of all households accessing the Internet in 2003 to do so using a digital subscriber line.

Initially geared mostly for business use, DSL is quickly taking hold in the consumer market where it competes primarily against cable services provided by such companies as Excite@Home and Road Runner. A recent federal ruling could cut DSL prices for consumers, at least among competing local phone companies, encouraging the spread of the technology.

Although DSL prices have fallen in 1999, IDC expects DSL service revenue to spike over the next few years. DSL revenue will total about $2.3 billion in both the U.S. residential and business markets as early as 2003, according to a separate study by IDC released earlier this week.

Pent-up demand for faster Net connections will keep growth rates at exponential levels into next year, according to IDC. The company forecasts that small-business DSL lines will increase to 2.5 million lines in 2003, up from 60,000 lines in 1999. Small businesses will account for 20 percent of DSL lines in the United States, the study shows.

But despite the exploding growth, DSL has yet to make a dent in sales of more costly T1 lines. Most small businesses are upgrading to DSL from dial-up or ISDN connections, IDC said.

In the domestic residential market, work-at-home employees and so-called power users will continue to account for much of the growth. IDC expects about 9.3 million residential DSL users in the United States by the end of 2003.

In the future, IDC expects business DSL lines to be packaged with software application services while consumers will increasingly purchase DSL lines as part of a bundle with other communications services.