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A new study by analysis and research company GartnerG2, a subsidiary of Gartner Inc., claims that European consumers will not pay excessive prices for broadband over the next three years. The unwillingness on the part of consumers to shovel out heaps of money for high-speed Net access is in part because potential users do not understand the benefits of the services, Gartner claims.
Gartner said in an interview with Reuters that speed alone is not enough of a lure to users to cough up the relatively large sums of money that telecoms demand for the always-on Internet service. Moreover, users have doubts about what kinds of services and applications they can expect to get with broadband and there seems to be ignorance about what the service is capable of providing, Gartner claims.
Internet companies, telecoms and media firms have all been betting on broadband and its potential to drive more users on-line, for longer periods of time, using more sophisticated applications. The vision of a home computer that also serves as a home video and audio entertainment unit has long been one hyped by telecoms and media companies, but without broadband, this vision will never come to fruition.
According to the Gartner report, less than 10 percent of Internet households believe broadband provides good value and the countries with the highest subscription prices, such as the UK, have the lowest penetration. The average subscription cost for broadband in Europe is between EUR45 and EUR60 per month, roughly twice the average fee for dial-up access. Although there currently is no consumer broadband service in Ireland, Eircom's proposed price, not including connection fees, was around EUR99 per month.
With prices what they are, Gartner says that just 10 percent of households in the UK, Germany and France will have broadband Internet access by 2005. At the end of last year, the three countries, Europe's three biggest Internet markets, had a combined 1.7 million broadband households, equal to 1.9 percent of total households, Gartner claimed.
Gartner's dreary predictions for the rollout of broadband in Europe comes on the heels of a report in the Sunday Telegraph which claims that BT will cut the price of its ADSL offering by as much as 50 percent.
A BT spokesperson subsequently denied that the company has plans to cut its broadband (ADSL) subscription rates by such a drastic amount, but it is thought that a series of price cuts will be announced in the coming months.
BT's new chief executive, Ben Verwaayen, is believed to be the driving force behind the decision and official announcements on the issue are expected to come later this week when British Telecom releases its results.
BT's wholesale ADSL price is around STG30 per month with a retail cost of around STG40 per month. In order for BT to cut ADSL costs for consumers by 50 percent, it would have to sell the service at a loss, which is not allowed by UK telecommunications regulations. Were the prices to go below BT's costs, Oftel would be put in the position of deciding on whether to block the price cuts.
In Ireland, there is currently no consumer broadband offering. A row between the ODTR and Eircom has blocked the rollout of ADSL services here, both for consumers and wholesale customers.
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