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Broadband Britain 2008 – a second tier state

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More than a third (35 per cent) of British households will have broadband Internet access by 2008, according to a study by analysts Forrester published today.

But the prediction that 9.5 million British households will be connected to higher speed networks in five years time stills leave Britain lagging Scandinavia and the Netherlands in Net connectivity in 2008, according to Forrester's predictions. It reckons Britain will be outpaced by its neighbours in the broadband market because the price difference between narrowband and broadband connections in the UK is still too high.

Across Europe, Forrester estimates that by 2008 30 percent of homes will have broadband, a figure that will represent 57 per cent of the online population five years hence. However access to fast Internet connections will be far from evenly distributed across the continent.

"Europe's broadband riches will be unevenly split along a clear north/south divide, with 2008 penetration varying from five percent in Greece to 45 percent in Norway," said Forrester Senior Analyst Lars Godell. "Scandinavia and the Netherlands will dominate the ratings; German-speaking Europe, Belgium, Finland, and the UK will form a second tier; and Southern Europe [including France] and Ireland will continue to lag."

According to Forrester, high overall online penetration and low broadband price premiums over dialup will drive Scandinavia and the Netherlands beyond 40 percent penetration in 2008.

With 2008 penetration rates between 30 percent and 35 percent, German-speaking Europe, Belgium, Finland, and the UK form a second tier separated from top performers for reasons such as lower overall online penetration and higher broadband premiums.

Price is preventing a wider expansion of the UK broadband market, Forrester reckons.

Godell comments: "With a broadband price premium of 74 per cent, UK broadband ISPs only managed to convert 13 per cent of dial-up users in 2002."

"Increased competition and better product bundles will drive broadband from 0.2 percent of UK households in 2000 to 35 percent in 2008," he added.

ADSL Vs. Cable - who's the daddy?

The analyst also has plenty to say about which broadband technologies will win out over the next five years.

Forrester predicts that ADSL will be the dominant platform for broadband access in Europe because it reaches at least twice as many households as cable and because of the way the market is shaping up.

In 2008, ADSL will claim 71 per cent of European broadband connections, dwarfing alternatives, Forrester estimates.

According to Godell, cash shortages will "kill cable's momentum; fiber's business case remains daunting; and alternative technologies - like fixed wireless and two-way satellite - are too little, too late.

"Cable's 36 percent coverage will never be able to match ADSL's 80 percent-plus without big investment. But with some of Europe's biggest cablecos - UPC, NTL, and Telewest - all having gone through bankruptcy and debt restructuring, there's no cash to expand coverage, upgrade networks, or splurge on marketing to convert homes passed to subscribers."

As a result, Forrester expects cable's market share to drop from 53 percent in 2000 to 22 percent in 2008 (but this may be a European phenomenon, as we'll see).

Fixed wireless and two-way satellite can serve niches in rural markets where ADSL and cable don't go but Forrester sees these access methods - and expensive fibre connections - as the exception rather than the rule.

Forrester predicts alternatives will serve only 7 per cent of broadband households in 2008, largely delivered by incumbents such as France Telecom.

The analyst firm is even more dismissive about powerline technology, the idea of sending high speed Internet traffic over electrical cables.

"Persistent delays, quality problems, and absent vendor backing will relegate it [powerline] to pet-project status at cash-flush utilities like RWE and nothing more," Forrester concludes.

Cable - a tale of two continents

In contrast to Forrester's negative view on cable, analyst firm In-Stat/MDR reckons "cable modem services are absolutely hot".

Worldwide cable modem subscribers reached a total of 27 million in mid-2003, and will grow to 68 cable modem subscribers by 2007, In-Stat/MDR predicts.

By geographic region, North America has the most cable modem subscribers with over 14.6 million. The Asia-Pacific region was second with 6.6 million, followed by Europe with 3.7 million. Cable TV operators collected $11 billion in cable modem service revenues in 2002, according to In-Stat's cheerfully titled Broadband Bonanza: Worldwide Cable Modem Subscribers Approach 30 Million report.

The way In-Stat tells it you wouldn't believe cable operators are in the poo this side of the Atlantic.

"With demand for high-speed Internet access increasing, many of the world's leading cable TV operators have invested heavily to upgrade their cable infrastructure in order to provide cable
modem services," said Mike Paxton, a Senior Analyst with In-Stat/MDR.

Many North American cable operators are enjoying monthly operating margins that range from 50 per cent to 100 per cent", he added. ®

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