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.

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," he added.

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 Networks 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 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.