People canceling broadband accounts

Not only is broadband not expanding as forecast, current broadband users are dropping the service in rising numbers. It is likely that cancellations are rising because of the bad economy, the rise in broadband pricing and disappointing content. It is especially evident in areas like San Francisco Bay Area where high tech jobs have been vanishing by the thousands.

The death of Napster is believed to be another major influence. At its peak, it had 64 million registered users. These users were inclined to install broadband to download the MP3-encoded files. There has not been another "killer app" to replace it and drive the growth of broadband.

Defectors, which are known in the industry as "churn" are particularly disturbing because the providers expect a long term revenue stream to defray the installation costs. The margins for DSL providers are in the 5% range so a small amount of churn will hit them hard financially. To compensate, they must raise monthly rates which touches off a vicious cycle of cancellations for price reasons, and then more rate raising.

View: Full Article @ CNet

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