European Broadband Revolution Is On Hold, Says GartnertG2

GartnerG2 says that the broadband proposition faces a dilemma that will not be solved easily: “Although consumers are aware that broadband offers faster internet access, there is currently no ‘must have’ application to convince the majority of consumers they need broadband, let alone pay for content,” says the report.

According to the survey, fewer than 10% of internet households think broadband currently provides good value. In Europe, broadband penetration is lowest in countries where the price is highest.

“The industry has assumed that broadband would set consumers on fire, said Adam Daum, chief analyst at GartnerG2. “However, speed alone is not enough: there must also be attractive broadband content.” In the absence of this content, the research shows that consumers are very price-sensitive.

“To achieve widespread adoption of broadband, the price needs to fall from its current level of 45-60 Euros per month to less than 30,” adds Daum.

Telcos face loss of dial-up revenue This is a tough decision for European telcos to make. Even if consumers do switch from narrowband access to broadband, telcos face a high level of cannibalisation of current dial-up (narrowband) revenues.

The findings of a Forrester Research report show that broadband connections will take revenues away from fixed-line providers and dial-up internet service providers (ISPs); by 2006 50% of US households will use a high-speed internet access for voice and data, says Forrester (see The Beginning Of The End For Conventional Phone Communications?).

Could DSL save the telcos? Subject to regulatory approval, DSL service providers – which are traditional telephone companies – could use their networks to deliver pay-TV and telephone services. However, this requires significant investment and is also a risky move because it puts DSL providers into head-on competition with digital cable and satellite TV operators.

This has also been noted by another report from Forrester, which warns that if European telecommunications companies endeavour to compete with cable operators by building ‘hybrid’ satellite and ADSL networks they will end up losing more than E3,000 (£1,830) per subscriber over ten years (see European Telcos Will Lose Out If They Compete Head On With Cable Companies, Warns Forrester).

The state of the markets in the countries on GartnerG2’s survey, as at the end of 2001, are shown in the table and graphs here.

GartnerG2 says that three things must happen in order to drive broadband adoption across Europe:

• Attractive content: media companies need to develop attractive applications. Much of this will centre on entertainment, but there is also an opportunity to use educational content to help drive broadband into family households.
• Try before you buy: consumers need to experience broadband before they commit themselves to regular monthly subscriptions. Broadband ISPs could help kick-start the market by providing high-speed connections to public-access locations such as internet cafes, libraries and schools.
• Lower prices: the price differential between narrowband and broadband must be significantly reduced. Based on current levels of price-sensitivity, broadband would have to be offered at below 30 Euros per month to achieve widespread take-up.

Optimise for narrowband GartnerG2 believes broadband will become a reality, but it will be adopted more slowly than most people have predicted. The group is recommending that businesses continue to optimise web sites for narrowband access, delay investments in broadband internet content and use rich media advertising sparingly.

The report, Broadband: The Revolution is on Hold in Europe Just Now, is available from GartnerG2.