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Middle class goes broadband as price falls (2006-10-03)

Middle- and working-class Americans signed up for high-speed Internet access in record numbers in the past year, apparently lured by a price war among phone companies.

Broadband adoption increased 59 percent from March last year to March 2006 among U.S. households with incomes between $30,000 and $50,000, according to a survey released by the Pew Internet and American Life Project.

It increased 40 percent in households making less than $30,000 a year. Among blacks, it increased 121 percent, according to the study.

Middle- and lower-income households still lag higher-income households when it comes to broadband adoption. Among the $30,000-$50,000 households, 43 percent now have broadband, compared to 68 percent for those making more than $75,000.

Overall, 42 percent of adult Americans, or 84 million people, have broadband, compared to 30 percent a year ago.

Phone companies last year started slashing prices for broadband service that uses regular phone line to establish a digital subscriber line, or DSL. Both Verizon Communications Inc. and AT&T Inc. introduced $14.99 per month offers.

“It seems like the aggressive pricing strategies have had some effect for DSL providers in those middle-income segments,” said John Horrigan, associate director for research at Pew.

The average monthly fee for DSL was $32 in December, compared to $41 for cable. A year and a half earlier, DSL cost almost as much as cable.

A separate survey by Leichtman Research said DSL has now overtaken cable modems in popularity among middle-income households, though cable modems still make up the majority of home broadband connections overall, at 52 percent. Principal analyst Bruce Leichtman said that figure probably underreported cable modems slightly.

Leichtman said that while DSL is making strides, cable is also adding customers quickly. “The fact is they’re both winning. From a profitability standpoint, cable is winning a lot better.”

Broadband connections make it much easier for users to put their own content on the Internet, whether it’s pictures, blog postings or pages on networking sites like MySpace.

Surprisingly, the Pew survey indicated that households making less than $50,000 a year are slightly more likely to contribute to Internet content. This is a big change from 2002, the first time a Pew survey asked about user-generated content. Then, “a ‘broadband elite’ of mostly male technophiles were responsible for most of this activity,” Horrigan wrote.

Pew surveyed 4,001 adults by phone between Feb. 15 and April 6. The survey had a margin of sampling error of plus or minus 2 percentage points.

Leichtman Research surveyed 1,600 households by phone in March. The margin of error was plus or minus 2.5 percentage points.

Source: www.BusinessWeek.com.

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