Fat Pipes Still Thin On The Ground

Although critical to the expansion of e-commerce, broadband roll out in Britain is lagging behind.

Plain Words reports.

Robin Terrell, UK managing director of Amazon, said recently that poor Internet access continues to hold back online retailing. He explained that reliance on slow 56 Kbps Internet connections, rather than fast broadband (or "fat pipe") connections, could have prevented many people from buying online.

"We may have millions of customers - about 35 million at the end of this year's second quarter - but there are many more Internet users that have never shopped with us, and many people that have not used the Internet at all," he said.

The speed with which people can access the Internet is clearly a crucial ingredient to consumers taking to shopping online. Waiting minutes or more for catalogue pages to load so products can be viewed is tedious and off-putting. And if the product being purchased is downloadable - such as a software application or an electronic book - fast download times are even more important.

The problem is, not everyone has access to fast broadband connections - particularly in rural areas. They have little choice other than to access the web via a dial-up connection.

This, however, looks set to change. Earlier this month, Stephen Timms, the e-commerce minister, promised that 90% of the UK population will have access to broadband by 2006. This target came just two weeks after Government ministers were criticised by the Commons' Rural Affairs Committee for failing to address the digital divide between town and country.

Currently 72% of the UK population has access to broadband. But this is skewed towards urban areas, where it is economic for companies to build a broadband network.

Plan to connect rural areas

Timms claimed that a new Government initiative to set up nine Regional Aggregation Bodies (RABs) to buy broadband services collectively will accelerate the roll out.

"This is going to be a big contributor to getting broadband to rural areas," said Timms. "I think we can get to a situation where we have 90% of the population within reach of broadband within three years."

Being within reach of broadband is not the same as actually having it - which is the crucial factor that will boost e-commerce in the way that Amazon's Robin Terrell is hoping for.

So what level of take-up can we expect to see?

A recent study by analysts Forrester predicted that, by 2008, 30% of homes across Europe will have broadband - a figure that will represent 57% of the online population in 2008.

But there is a downside: access to fast Internet connections will not be distributed evenly 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% in Norway," said Forrester Senior Analyst Lars Godell.

He added that 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 lag behind the rest.

According to Forrester, price is preventing a wider expansion of the UK broadband market.

"With a broadband price premium of 74%, UK broadband ISPs only managed to convert 13% of dial-up users (to broadband) in 2002," he explained. "Increased competition and better product bundles will drive broadband from 0.2% of UK households in 2000 to 35% in 2008.

As crucial as a rail network

Keith Todd, head of Government advisory body the Broadband Stakeholders Group (BSG), believes broadband roll out in the UK is as crucial as having a decent rail network. He is promoting broadband in the UK as the infrastructure for a new way of working globally.

"It's clear to me there's a new economy that exists that can change the way things happen socially and economically. Broadband is the number one catalyst for this change and I see it as at least as important as the UK rail structure."

But which broadband technology will gain the winning share over the next five years?

Forrester predicts that ADSL will be the leading 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. It estimates that by 2008 ADSL will claim 71 per cent of European broadband connections, dwarfing alternatives

According to Forrester analyst Lars 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," he says.

In Godell's view, cable's 36% coverage will never be able to match ADSL's 80%+ without big investment. But with some of Europe's biggest cable companies (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% in 2000 to 22% in Europe.

Next big computing revolution

Whatever proves to be the case, the fact remains that high-speed "fat pipe" access is the next big computing revolution - and, as such, needs to be nurtured. Not only does it encourage e-commerce, but it opens up the full potential of Internet to everyone. Without the "world wide wait", as it has been dubbed, people can shop online without getting frustrated and can sign up to such things as online learning and training.

Amazon's Robin Terrell was right to highlight the poor state of Internet access in this country. But it isn't just about online retailing. It's about expanding the whole economy. And that means making sure everyone can get access to broadband connections with ease and at low cost. Blanket broadband coverage would assist smaller businesses and budding entrepreneurs. Plus it would encourage distance learning and training. All of which has a positive knock on effect on the economy.

Plain Words Editorial
20.8.2003