Broadband Crucial to Consumer Strategy

Microsoft has hatched a long-term consumer strategy based around broadband Internet access as a response to a declining PC market. The company believes broadband can deliver new, compelling applications and content that will prompt consumers to upgrade their PCs and software, buy other devices with Microsoft software, and subscribe to new fee-based services. As part of this strategy, Microsoft has invested more than US$10 billion in broadband distributors, primarily hoping to spur broadband adoption. These efforts could open new consumer markets for Microsoft’s partners and competitors alike.

Why Microsoft Needs Broadband

Microsoft has based its consumer strategy on the idea that fast, always-on Internet connections will eventually become widespread, replacing traditional dial-up connections in most homes.

It was forced to place this bet because the Internet-driven explosion of PC sales has finally come to an end. In 2001, worldwide PC sales dropped for the first time since 1985, and Microsoft Chief Financial Officer John Connors has cautioned that the first half of 2002 will also see flat or declining sales. Microsoft recognizes that consumers make up the largest market for new desktop PCs and the Microsoft software that comes with them (consumers bought 15.5 of the 17 million Windows XP copies sold in 2001), and it needs a new way to attract them.