European ISPs Suffer Pros and Cons of User Explosion

PC-based consumer Internet usage in Western Europe is expected to nearly double, from 24 million households in 1999 to 45 million households by the end of 2001, according to research by The Yankee Group. This growth, however, has been a double-edged sword for European ISPs.

According to the report, “European Consumer Internet: Growth, but at What Price?,” the acceleration in Internet usage has been spurred on by the availability of free-metered (free ISP subscription, but local calls charged for), and unmetered access, it has come at the cost of long-term sustainable access revenue, and is now fueling rapid consolidation among consumer ISPs.

“Within most Western European countries, consumer take-up of Internet services is jumping at astounding levels, particularly in areas termed ‘Internet poor’ in the past, such as Spain and Italy,” said Scott Smith, Director of the Internet Strategies Europe group at the Yankee Group Europe. “These countries are growing at a faster rate than Europe’s more advanced Internet economies, such as Germany, Sweden, and the UK. But we are also seeing ISPs in these and all markets choosing to buy customers and revenue through acquisition as their access revenues suffer under competition from aggressive access pricing.”

The report forecasts that revenues directly from fixed-line dial-up access in Western Europe will grow from $5.5 billion at the end of 1999 to just under $9 billion by 2003 on the momentum of rising user numbers. However, the Yankee Group believes that 2003 will see the peak of dial-up revenues as prices continue to fall and users shift to broadband. By 2005, the forecast predicts dial-up revenues will fall to just over $8 billion, and will continue to fall as broadband takes off and pricing for high-speed access becomes more attractive.

The report identifies other trends, including:

  • Mobile device-based Internet and Internet via TV will become two important means of access in Europe, more so than in the US or other regions. The rapid evolution of these access devices, and equally rapid take-up, will define the shape of the European consumer Internet experience going forward from 2000.
  • Consolidation is rapidly creating pan-European consumer Internet players from the combination of regional ISPs. According to the report, this will strengthen the market rather than weaken it. Mergers between content and communications players will increase as a means of creating more relevant, compelling, and sticky content attract and retain users and keep them online longer.

Related reading

pokemon go