The number of households with internet connections dropped by one percent in the three months to August, but it's too early to tell if this downwards trend will continue says telco watchdog Oftel.

In May 2001, the date of Oftel's previous report, 40 percent of homes were on the net, but that figure had dipped to 39 percent by August.

Until now home internet usage has shown no signs of slowing down since Oftel's first report back in January 1999. Oftel said it is difficult to tell why numbers have dropped and cited "the current economic downturn" as one possible cause.

The role of unmetered internet packages was also highlighted with 40 percent of those homes online now using a fully or partially unmetered package. Oftel believes it plays an important role in getting people from lower income groups online.

The good news is that although internet sign-ups may have dropped, the average time people are spending online has increased by 30 minutes over the period, with surfers now typically spending eight hours online a week.

Oftel said the one percent drop fell within its margin for error — it allows between two to four percent for mistakes — and that the change was too minimal to start worrying.

But the fall could well be real — early in the year AOL closed its pay-as-you-go ISP service in favour of its fully unmetered access package because demand had fallen dramatically.

A significant majority of those people questioned by Oftel (84 percent) are using dialup access to get online, with only four percent having made the leap to ADSL or other broadband connections. However, industry findings for broadband are even bleaker at nearer one percent takeup.

Oftel is "planning to carry out an additional benchmarking exercise for the broadband market", due out early next year, but could not give any details of the study, which is still in development.