The UK Internet access market mimics the US, with the same top three ISPs/portals — MSN, Yahoo!, and AOL. But according to a new brief by Forrester Research B.V. (Nadsaq: FORR), broadband will turn local challenger ntlworld into a worthy opponent, while the rest of the players will just try to hang on.
MSN, Yahoo!, and AOL had a combined UK market share of 26 percent in 2002 but lost ground as nontraditional portals Google, eBay, and the BBC almost doubled their joint share. Today, AOL, with its premium ISP offering, expects to make most money in access, but MSN and Yahoo! rely on advertising for more than 80 percent of their income. In 2003, MSN and Yahoo! will fail to differentiate and will continue to offer the same products: premium email-related services. Forrester believes that while MSN will use its technology skills to attract advertising pounds, Yahoo! will hit back, using Inktomi technology to grab paid-for searches. AOL’s narrowband users will keep it strong but only for another year.
“nltworld has clawed its way from bankruptcy to being the ISP/portal with the highest number of broadband subscribers in the UK, doubling its traffic share during the year,” said Forrester Analyst Hellen K. Omwando. “By charging consumers a low-entry broadband access price of £17.99, ntlworld has ensured that 60 percent of its 1.7 million Net subscribers use broadband, and it has reduced annual churn from 25 percent to 13 percent. As its two-way cable broadband base quickly saturates, it will turn to its affiliated digital TV platform to cross-promote traffic and cross-sell non-access-related services and content. By contrast, expensive BT Openworld has languished, and its traffic share — which includes other BT properties — has remained at about 2.4 percent. Going forward, BT Openworld must pick a price-insensitive niche such as home businesses or up-market consumers that want to play it safe with the BT brand.”
Although it had the most ISP subscribers two years ago, Freeserve.com has barely broken through the 2 percent traffic-share barrier. Also, its subscribers’ average 14-minute online session is less than half the 35 minutes spent by users of the US players and ntlworld, Forrester believes that Freeserve.com should focus on maintaining its narrowband users — 24 percent of the UK narrowband market — and compete by launching functional services like property finding.
“Tiscali and Lycos are still hanging on, but only just,” Omwando added. “Tiscali has the same broadband offer as ntlworld but crucially lacks the strong brand, and Lycos has maintained its 1.3 percent market share through Emotive Network services like Tripod and love@lycos. This year Forrester advises Tiscali to court SMEs, while Lycos should either retreat or seek a buyer. The Tiscali Group’s pan-European ambitions remain firm; with IP network coverage in the UK, it will not dispose of Tiscali.co.uk any time soon, despite its losses. But as BT and ntl put the heat on broadband access, Tiscali will shift to the underserved SME market. Conversely, Lycos.co.uk has run out of steam and should be incorporate into Terra Lycos’ portfolio of European properties, thereby avoiding another party acquiring the use of the Lycos brand name.”