Broadband providers struggle to stand out

With the number of broadband connections poised imminently to overtake dial-up, internet service providers (ISPs) are looking at ways to distinguish their service from rivals by means other than price and speed.

Nevertheless, it is these factors that have driven the market, and for many first-time broadband users will be the key consideration when choosing an ISP. Providers are responding accordingly by slashing prices. NTL and Bulldog both fired their latest salvos in the broadband war this week. NTL launched a limited-time offer of &£9.99 a month for a 1Mbps connection (MW last week), while Cable & Wireless subsidiary Bulldog announced a doubling in the speed of its basic service to 8Mbps, with a starter package at &£15.50 a month.

Broadband penetration had reached 25 per cent of UK consumer households, or 6.4 million homes, by the end of the first quarter of 2005. With about half of these homes signing up to broadband within the past year, dial-up is in danger of extinction.

Dial-up connections accounted for 7.8 million homes at the end of March 2005. NTL believes that by 2010 there will be about 17 million broadband subscribers, compared with 3 million dial-up users.

Hundreds of ISPs with differing offers are competing for new and existing broadband users. BT Wholesale alone supplies capacity to more than 200 retail ISPs, some of which act as wholesalers for a further 100 to 200 smaller ISPs. Other ISPs also lease capacity from satellite companies or cable operators such as NTL and Telewest.

With so many providers the broadband market, which is led by BT’s retail arm with about one-third of the market, has been likened to the financial services industry, with a confusing array of products and offers but little brand loyalty. However, suppliers argue that broadband is not a commodity ruled just by price and speed, and that consumers are considering other factors.

Corey Monk, director of product marketing for NTL’s consumer products division, says its &£9.99 1Mbps offer is designed to entice consumers who are still wavering about signing up to broadband. For other consumers, content is key. NTL has launched Broadband Plus, which includes a subscription to music download service Napster and streaming video from MTV.

Emma Sanderson, director of BT Broadband, the division responsible for broadband within BT Retail, agrees that price is not the determining factor. She says: “Consumers are looking for good value from the overall package on the basis of what they are actually going to be using broadband for.” While BT’s basic 1Mbps service costs &£17.99, she claims it offers uploading and downloading at the same speed.

Music downloading is the application that has been bringing the masses to broadband, but it video and television content will soon be driving take-up. For broadband providers, future profit growth will increasingly have to be driven by value-added services and exclusive content – which means forming alliances with rights owners. But that demands a whole new set of skills.

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