Cost of Net access to rise in Europe

Consumers in Europe can expect to pay more for Net access next year, according to Merrill Lynch.

In a study of the European Internet marketplace, the investment bank concludes that there is little downward pressure on Net access prices. Instead, it suggests that there is room for ISPs to hike their subscription packages - albeit only modestly.

For example, a 10 per cent rise (£1.50 a month) in the UK for unmetered Net access would have little impact on demand but would contribute handsomely to revenue levels for ISPs which have in excess of a million paying customers.

Indeed, Merrill Lynch believes there is scope for price rises for at least the next three to five years concluding that "we may be entering an economic 'sweet-spot' for European ISPs".

It adds: "Consumers, who have become used to eating a free lunch at the ISP's expense, will inevitably end up paying more (which we believe is right)."

Moreover, analysts believe the future for major players is looking bright despite the dotcom shakeout. Consolidation means that a few ISPs will come to dominate each country.

Merrill estimates that the Big Seven ISPs - AOL, Wanadoo, Terra Lycos, T-Online, Tiscali, SEAT, Infostrada - now account for more than half of all paying subscribers (33 million out of a total of 55 million) in Europe and will ultimately gain up to 80 per cent of market share. ®