Broadband use in UK surpasses US levels

timesonline.co.uk | September 22, 2005
By Elizabeth Judge, Telecoms Correspondent

THE proportion of British households with broadband internet access has leapfrogged American levels for the first time, marking a milestone in the take-up of the high-speed service here.

Research from Point Topic, the broadband research firm, revealed yesterday that in the second quarter of this year broadband penetration in Britain overtook that of the US. There were 14 broadband connections per 100 Britons, compared with 13 in the US.

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Although the gap is narrow, the fact that Britain has overtaken the US, traditionally the home of internet and technology developments, was welcomed as highly symbolic by industry experts.

A spokesman for Ofcom, the telecoms regulator, said: “Broadband in the UK is proving to be one of the most significant and rapidly growing technologies of recent times.”

Analysts said the increasing uptake of broadband in Britain was down to several factors, including more competition, cheaper prices and greater investment by telecoms and internet companies in the technology. More people were also starting to understand the advantages that broadband offered over dial-up services.

Blair Wadman, of uSwitch, which compares prices of internet and telecoms products, said: “Our perceptions of the US are of it being ahead of us in many technological developments including broadband. But in the UK the availability of broadband has increased substantially so that everyone can have it if they want it and, in recent years, the increased number of suppliers has driven down prices.”

In Britain broadband take-up was initially slow. But, according to Ofcom, about 250,000 households are now signing up for the “always-on” internet access each month — the equivalent of a city the size of Sheffield.

There are now more than 100 suppliers of broadband in Britain including players such as NTL, Telewest and BT. New players are still entering the market and speeds are constantly being upgraded.

Be, a Swedish internet start-up, recently became the first player in Britain to provide 24 megabits per second (Mbps), “next generation” broadband.

Until early last year the average price for a 1 Mbps broadband connection in Britain was £35, now it is less than £20.

Tim Johnson, of Point Topic, said the US broadband market was now less competitive than Britain’s. “Although the US telecoms players face strong competition from cable companies, they do not face the same fierce level of competition from resellers and local loop unbundling that there is in the UK,” he said.

Despite Britain’s success, it is ranked only fourth in broadband density across the group of G7 countries, the research found, behind Canada, Japan and France.

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++ Related

forbes.com | Broadband Growth Narrows In U.S.
Lisa DiCarlo, 09.21.05, 4:10 PM ET

NEW YORK - After years of double-digit growth, the rate at which Americans are switching to high-speed broadband Internet connections is slowing considerably and could slow further. That the U.S. is a laggard in broadband penetration--the country ranks 12th globally--could have implications for America's social and economic standing in the world.

Lack of growth may also hamper efforts by content owners (music, movies, television and videogames) to digitally distribute their product.

The findings of the study will be presented Saturday at the Telecommunications Policy Research Conference in Washington, D.C., by John B. Horrigan, research director of the Pew Internet Project. In May 2005, 53% of home Internet users had high-speed connections, up from 50% in December 2004. It's an increase that Pew deems "small" and "statistically insignificant" and one that "compares unfavorably" with the double-digit growth rates of previous years.

Worse, there is less pent-up demand for broadband among dial-up users, and the potential pool of high-speed subscribers is either holding steady or declining. Indeed, this scenario is evidenced by new-subscriber growth statistics among some companies. Comcast (nasdaq: CMCSA - news - people ), the largest cable operator in the U.S., reported 297,000 new broadband subscribers for the quarter ended June 30, down from 327,000 new subscribers a year earlier.

In its second quarter ended in June, Verizon Communications (nyse: VZ - news - people ) added 278,000 high-speed digital subscriber line (DSL) subscribers, down from 280,000 new adds last year.

According to Pew, 32% of American adults don't use the Internet, a figure that has held steady in the first half of 2005. Just 23% of new Internet users who have come online in the last year have done so via broadband.

Broadband Subscribers Per 100 Residents

Country DSL Cable Other Total
Korea 14.1 8.5 2.2 24.9
Netherlands 11.6 7.4 0 19.0
Denmark 11.8 5.5 1.6 18.8
Iceland 17.4 0.2 0.7 18.3
Canada 8.6 9.1 0.1 17.8
Switzerland 10.8 6.5 0 17.3
Belgium 9.6 6.0 0 15.6
Japan 10.4 2.3 2.3 15.0
Finland 11.2 2.2 1.6 15.0
Norway 12.3 2.0 0.5 14.9
Sweden 9.5 2.6 2.5 14.5
United States 4.7 7.4 0.9 13.0
France 9.9 0.7 0 10.6
United Kingdom 7.1 3.4 0 10.5
Austria 5.5 4.7 0.1 10.2
Source: Organization for Economic Cooperation and Development, December 2004

There is a host of reasons for the slowdown in high-speed Internet subscribers.

Price may be just one of many factors. The average monthly cost of a high-speed connection, according to Pew, is $39, compared with $38 three years ago. In an attempt to lure the millions of high-speed holdouts, Verizon and SBC Communications (nyse: SBC - news - people ) last month announced $14.95 monthly DSL plans.

Their services technically qualify as broadband under U.S. Federal Communications Commission standards, but the speed, 768 kilobits per second, is much slower than standard DSL or cable service.

Horrigan says a bigger hurdle to overcome is user apathy and a lack of involvement with the Internet. "A big issue is that dial-up users today are less-ardent Web users than they were three years ago," says Horrigan. He says dial-up users are experimenting less, doing less online and spending less time online than they did three years ago, so they don't see the benefit of higher-speed connections.

"The profile of experienced Internet users is different because they're not as fervent in their Internet use, [which] explains why further growth in the broadband population is likely to slow down," Horrigan says.

Today's dial-up users are also less educated, older and have lower incomes than dial-up users surveyed several years ago.

Geographic sprawl may be another reason why more Americans aren't using broadband, as opposed to more densely populated and smaller countries. And in contrast with some countries, in the U.S. broadband access is not subsidized by federal, state or local governments. This will likely become a more controversial point as activists and politicians assess the economic and social costs of being disconnected.

Still, for those who are online, and particularly for those using broadband, the Internet is a part of everyday life. The Internet "is weaved into the social fabric of the country," says Horrigan, who points to e-government, health care and emergency information, and e-mail as some of the "social goods" that strengthen the fabric.

For politicians, championing subsidized high-speed access (whether wireless or wired) may be a way to court constituents and turn Internet access into a sort of public utility. But they will likely butt heads with free-market proponents who dislike using taxpayer funds for such things, while noting an inequity: The private sector lacks access to cheap capital like municipal bonds.

All this is not to say that broadband hasn't enjoyed a steep adoption curve. Uptake in the U.S. has been faster than that for color televisions and cell phones. Today, 66 million Americans use broadband, up from 5 million in 2000.

But Horrigan notes that the slowdown in growth is not going to rectify itself, and that "policy experimentation," perhaps in the form of a tweaking of the Telecommunications Act of 1996, may be necessary to kick-start growth.

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