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_____________________[PRO] Consumers deterred by high cost of broadband

Consumers will adopt broadband telecommunications, widely seen as the key to the e-commerce revolution, only when the cost is roughly equivalent to what they are already paying for conventional telephone services, a study suggests.

The finding discredits the view that residential customers can be persuaded to pay for high-speed services on promises of faster connection to the internet or films delivered on demand over telephone lines.

The investigation, carried out across 14 European countries, indicates that on average the trigger point is €39 (£25) a month, which means that BT Group's cheapest option at £27 a month plus line rental for a basic service is still too expensive to stimulate mass adoption in the UK.

This goes some way to explaining why there are 11m broadband customers in Europe - representing about 10 per cent of households - but only about 1m in the UK. According to Tony Freeth of the research group fdtm, who worked with Reed Electronics Research on the study, consumers are unimpressed by broadband speed or performance: "The important issue is the total cost to the subscriber including line rentals and call packages. When you put that together you get a trigger level across Europe of €39."

Nevertheless, Mr Freeth expects 50 per cent of UK urban households to have adopted broadband by 2007, perhaps prompted by Telewest and NTL, the cable operators, who are offering broadband packages priced as low as £14.99 a month.

Broadband technologies make possible fast and continuous connection to the internet. They allow much greater volumes of data to be transmitted to and from homes and offices than the comparatively slow modems that connect most domestic personal computers to the internet. A broadband connection makes possible telephone calls, internet browsing, e-mail and video-on-demand over the same line.

The most important broadband technology is ADSL which makes it possible to transmit voice calls and computer data over conventional copper telephone wires.

BT has been criticised for delays in converting its exchanges to be able to handle ADSL and for seeming to make it difficult and expensive for competitors to offer alternative services. The rate of connection has accelerated in recent months, however. Mr Freeth says that while consumers make an economic judgment on when to adopt broadband, once connected they are prepared to upgrade to more powerful services despite extra cost.

European Broadband: completing the infrastructure
Reed Electronics Research.
(44) 020 8652 3120.
First of three volumes at £1,500 each or £3,000 for the set.

Consumers deterred by high cost of broadband
By Alan Cane
Financial Times; Dec 23, 2002


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