Faster connection to broaden Net horizons

Broadband access is revolutionising the Net, but unless connection costs are addressed digital TV could prove a more attractive option

Broadband Internet has arrived. And sooner than most people expected. For those consumers who sign up, it means that, instead of mainly text-based Net services, the Web comes alive with video streaming and crystal clear stereo sound.

Moreover, home users no longer have to waste time obtaining a dial-up connection, and information can be downloaded ten to 20 times faster than when using a conventional modem.

This is creating a second Net wave and delivering a powerful new distribution route for goods and services.

BT says more than 50 companies – including Thorntons, Carlton Online, eBay and Thomas Cook – have signed up as “content providers”.

Research shows broadband users stay online four times longer than narrowband. The logic is that longer sessions provide more opportunity to shop on the Net.

This is very exciting, but it doesn’t come cheap.

A BT Openworld customer will have to pay nearly £40 a month and a £150 connection fee (unless the service is ordered before June 30). While there are no call charges, high costs create a major barrier to entry and restrict the speed of take-up.

It’s a significant problem. Content providers which invest heavily in video provision will want to match their first-to-market positioning with rapid take-up.

So it’s likely that pressure will be applied to find ways to reduce the cost of such a service to the consumer.

This could either take the form of an added-value proposition which allows, say, free downloads of video games or Net retailers subsidising connection or monthly charges in return for customer loyalty.

It is more likely that prices will fall as a result of competing telecom services using BT networks. Fourteen companies, including NTL and Telewest, are already participating in trials.

However, the most interesting development of all will be in the field of television. Early next year, BT will introduce phase three, when broadband capability will be significantly expanded. There will be a huge increase in speed and bandwidth. It will provide massive potential for the distribution of video-on-demand services, including movies, and become the real battleground.

In this market, BSkyB, Open and ONdigital have already created the rules of engagement: free connection in return for subscribing to content. This delivers fast distribution and, with it, mass interactive services.

As a result, digital TV will ultimately become the dominant channel for online transactions.

Paul Longhurst is managing partner at Quantum New Media

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