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As the cost of high-speed Internet service declines and connection speeds become more important, high-speed service overtakes dial-up in market share for the first time, according to the J.D. Power and Associates 2006 Internet Service Provider (ISP) Residential Customer Satisfaction Study SM released today.

The study finds that 56 percent of residential ISP customers subscribe to high-speed Internet service—an increase of 11 percentage points from 2005. Correspondingly, market share of dial-up service has dropped from 55 percent in 2005 to 44 percent in 2006. This trend is expected to continue, as the intent to switch service providers among dial-up customers has increased by 3 percentage points from 2005 to 21 percent in 2006, while switching intent among high-speed customers has essentially remained flat since 2003 at 11 percent.

The average amount subscribers report spending per month for high-speed Internet service has steadily decreased since 2004—down by $1.99 to $42.13 in 2006. During the same time period, the average amount dial-up service subscribers report spending has also declined; however, the drop is less significant—falling $0.69 from 2004 to $18.45 per month in 2006.

“Although high-speed Internet service is still considerably more expensive than dial-up, bundling high-speed with other products, such as telephone and video service, has made it an increasingly attractive option for many customers,” said Steve Kirkeby, executive director of telecommunications and technology research at J.D. Power and Associates. “This is not to say that dial-up services are completely out of the picture, as dial-up still holds a significant portion of the market. More specifically, customers are often willing to pay more for faster Internet speeds, provided they are getting other services for less. Our research shows that customers are increasingly expecting offerings and incentives that recognize their loyalty, and high-speed Internet is a critical piece of the most attractive bundled offers.”

The study, now in its ninth year, measures customer satisfaction with high-speed and dial-up Internet service providers based on seven factors. They are: performance and reliability; cost of service; image; customer service/technical support; billing; e-mail services; and offerings and promotions.

Included in the study for the first time, WideOpenWest! (WOW!) ranks highest in satisfying high-speed Internet customers. WOW! receives the highest ratings from customers in performance and reliability, image, customer service, billing, cost of service and offerings and promotions. Bright House Network’s Road Runner follows WOW! in the rankings and performs well in the billing, performance and reliability, and image factors. BellSouth ranks third in the segment.

Across all providers, the study finds that DSL subscribers are significantly more satisfied than their counterparts who use cable modems to access the Internet. Aggressive pricing by traditional telephone companies has led to cost of service being the largest gap in satisfaction between DSL and cable subscribers. Despite the discrepancy in overall satisfaction scores, cable modem penetration continues to climb, with 32 percent of all households subscribing to Internet service—up from 28 percent in 2005. DSL subscriptions are up as well, climbing from 16 percent of the market in 2005 to 23 percent in 2006.

PeoplePC, a California based national provider of dial-up Internet service, also makes its debut in the study, and ranks highest among providers in the dial-up Internet service segment. PeoplePC is a subsidiary of EarthLink. PeoplePC receives the highest ratings from customers in four factors: cost of service, billing, e-mail services, and offerings and promotions. BellSouth follows PeoplePC in the segment rankings and performs particularly well in customer service. EarthLink ranks third in the segment.

The study also finds several other key Internet usage patterns:

* Seventy-eight percent of households subscribe to an ISP—up 9 percentage points from 2005
* High-speed subscribers spend an average of 22.6 personal hours per week on the Internet
* Dial-up subscribers average 22.2 personal hours per week online—up 3 percent from 2005
* Data transfer speed is particularly important to both high speed and dial-up subscribers.

The 2006 ISP Residential Customer Satisfaction Study is based on responses from 10,787 residential customers of Internet service providers nationwide.

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The overall rate of customers experiencing a wireless call quality problem has declined for a second consecutive year, with reported problems per 100 calls (PP100) reaching the lowest level since the inaugural study in 2003, according to Volume 1 of the J.D. Power and Associates 2006 Wireless Call Quality Performance StudySM released in March.

The study, now in its fourth year, measures the number of problems experienced with wireless call quality on a semi-annual basis. Call quality is based on seven customer-reported problem areas that impact overall carrier performance. They are: dropped/disconnected calls; static/interference; connection on first try; voice distortion; no echoes; no immediate voice mail notification; and no immediate text message notification.

The study finds that the percentage of wireless calls with at least one problem has declined from 26 PP100 in 2005 to 24 PP100 in the 2006 study—an improvement of 8 percent. The number of wireless calls that involved a problem also declined by 15 percent when comparing the 2004 (30 PP100) and 2005 studies. A lower PP100 score is better, as it means fewer problems experienced with call quality.

In addition to the decline in overall call quality problems, considerable improvements have been made in the areas of dropped/disconnected calls and calls with voice distortion. The number of dropped/disconnected calls has decreased by 15 percent when compared to the 2005 study. The number of calls experiencing voice distortion, which occurs when voice patterns become inconsistent due to problems with digital frequency, has decreased by 25 percent when compared to 2005.

“It’s clear that wireless providers have made great strides in improving the quality of calls, especially in those areas that impact customer churn the most, such as calls that are dropped or disconnected,” said Kirk Parsons, senior director of wireless services at J.D. Power and Associates. “With an increasingly competitive environment and an increase in the number of services used in conjunction with a cell phone, carriers that offer superior network quality will improve their likelihood of attracting new customers and will increase customer retention. In fact, improving network quality is a beneficial financial incentive for wireless carriers, as customers experiencing at least one call quality problem are three times more likely to indicate they ‘definitely will’ switch carriers in the future.”

The study also finds that overall call quality performance varies based on where a call is placed or received. Wireless calls within a local calling area have significantly lower PP100 ratings when compared to calls placed or received while roaming—27 PP100 and 55 PP100, respectively. Additionally, outdoor wireless calls typically experience less problems when compared to calls placed inside of buildings, particularly those made from home. “It is clear that carriers need to manage their network to reflect their specific customer’s usage patterns in order to provide the best possible call quality experience,” said Parsons.

T-Mobile and Verizon Wireless rank highest in five of the six U.S. regions (including one tie) included in the study. T-Mobile and Verizon Wireless both perform particularly well in the areas of initial connections, dropped/disconnected calls and voice distortion. U.S. Cellular is the only other carrier to rank highest in a region (North Central).

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