net.wars: Let them eat broadband
by Wendy M Grossman | posted on 12 July 2002
Wendy confesses: she understands BT's problem. No, really ...
I really do. I'm not saying I forgive them for non-broadband Britain. But take me as Exhibit A. Back in the mid 1990s, I was spending upwards of £3,000 a year on telecoms, about £2,500 of it going to BT for local calls to my ISP. My telecoms costs now are about £1,200 a year - and only about £250 goes to BT. That's a 90 percent drop in income from just one customer. I have a (non-BT) mobile phone, but it's insignificant. What, go out and leave the broadband at home? So, like I say, I understand BT's problem. I tend to think it - and AT&T - are going to have to go through something like IBM's 1993 near-death experience before it comes to terms with the changed world it's operating in.
That still doesn't make me terribly sympathetic about the state of broadband. According to the research group Netvalue, only 6 percent of the population actually have it. Which makes it seem as though I know personally most of the people who do. "Broadband Britain" has a nice alliterative ring - but compared to Denmark (24.5 percent), Germany (15.4 percent), and France, the UK is way behind. Not that I think national comparisons matter: the British Smiths do not have to keep up with the American Joneses just to show they can.
In December 2001, Sir Peter Bonfield, then CEO of BT, predicted it would be 2006 before 25 percent of the UK is connected to the Internet via broadband. The current CEO, Ben Vervaayen, more recently set targets of one million wholesale ADSL customers by the summer of 2003 and five million by 2006. Certainly, price cuts have helped. Pipex, for example, has dropped its setup charge for consumers, and even its business services starts at £24.95 a month, a far cry from the near-£100 prices that marked ADSL's original rollout.
ISPs console themselves with the thought that it took ten years for PCs to reach the 10 percent "critical mass" level, and eight for mobile phones. Against that: ADSL is available in only 60 percent of the country, from only one wholesale supplier, and these industry insiders were openly calling unbundling the local loop "a disaster". Cable is primarily an urban phenomenon. The big shock of the event: Eutelsat is still offering its dial-in, satellite-back service, now at ADSL-level prices. Now named Open Sky, Eutelsat's service was not admired when it launched in 1999 because of that piddly outward phone connection. But in rural areas, it's the only option.
On the other hand, 60 also happens to be the percentage of households without Internet access at all. Even of the households that do have Internet access, a recent Gartner survey showed that only 21 percent were "very interested" in upgrading to broadband, and their main reason to do so is not increased speed but flat-rate pricing. Gartner figures getting that 10 percent will take until 2005
My guess is that the case for buying broadband early would have been a lot more persuasive if, just as it was getting started, flat-rate dial-up Internet access hadn't arrived in the form of FRIACO . The choice facing people now is not the same as it was for me in the mid 1990s. Instead, they were choosing between £15 a month for all-you-can-eat-at-56K and £40 a month for always-on. And £15 a month is cheaper and the case for spending more not so compelling if you don't already live online.
It is possible to get too obsessed with the idea that everyone should have broadband. A report from the Pew Research Center published a few weeks ago tackles this very question, based on research among American broadband users. According to Pew, broadband changes the way people use the online world: they are "creators and managers of online content" (59 percent); they "use their always-on connections to satisfy their queries" (68 percent); they "do many things online in a typical day" (82 percent). Is that cause or effect? I've had broadband for two and a half years, and I match all of that. But that was true pre-broadband. The two big differences broadband makes are first, I can be constantly connected to friends via ICQ and IRC (also cutting down on my use of international long distance). Second, I can do my online research during the day, rather than saving it all up to do in the evenings when the rates go down. Neither of these has ever been an economic issue for American users, who've always had flat rate.
But permanent Net access has costs people haven't thought about yet. For example, for years I've known the local council owed me money. I hate making phone calls and writing letters. Then they put up a really good Web site. A few clicks, and I had the necessary form all printed out. So now the council is sending me a fat refund. See? Without broadband, they'd still have that money.
Wendy M. Grossman’s Web site has an extensive archive of her books, articles, and music, and an archive of all the earlier columns in this series. Readers are welcome to post here, at net.wars home, follow on Twitter or send email to netwars(at) skeptic.demon.co.uk (but please turn off HTML).
net.wars: Let them eat broadband