Only 0.2% of European households had broadband Internet access in 1999, but as the barriers drop one by one, this number will grow to 18%, or 27 million broadband subscribers by 2005. A new Report by Forrester Research B.V. (Nasdaq: FORR) outlines how the shift to broadband will require scale, scope, and brand strength that independent ISPs and broadband startups can’t handle, driving a shakeout that favors telcos and cablecos.
“To date, broadband has been unavailable, unaffordable, and uninteresting to Europe’s masses — but change will come fast,” explained Lars Godell, analyst for Forrester Research B.V. “Competition will radically expand coverage as cablecos and telcos battle it out. Forrester expects access prices to sink below [EURO]30 per month in 10 of 17 European countries by year-end 2002.”
Content will be the main driver for mass-market broadband penetration starting in 2003. Today’s broadband users seek a better Web experience despite the stiff price. Although price cuts will help double the number of subscribers, compelling new content will be the key to attracting the average person to broadband.
“Broadband will force a Net-access shakeout because the investment requirements will be enormous,” stressed Godell. “The new economics focused around scale, scope, and brand strength will change Europe’s Internet access landscape: Established telcos and their ISP affiliates will crush cablecos like chello, independent ISPs like Freeserve, and broadband pure plays like B2.”
With the highest online penetration this side of the Atlantic giving the region a head start, Forrester believes Scandinavia will match the US in 2005 with broadband penetration levels between 36% and 40% of households. Deutsche Telekom’s forceful response to an unbundling threat will drive Germany’s broadband penetration to 25% by 2005. UK broadband will draw 20% of households, while penetration in France will be limited to 11%. Netherlands will closely follow Scandinavia with broadband penetration hitting 28%, partly due to stiff competition between cable and ADSL. Forrester expects cable modems and copper technologies like ADSL to share 80% of the total European residential broadband market by 2005, with ADSL in the lead with 53% of all broadband connections.
For the Report “European Broadband Takes Off,” Forrester spoke with executives from 59 companies in 17 countries. They include members of Europe’s leading telcos, cablecos, ISPs, content providers, and hardware and software vendors.