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Thursday, 30 December, 1999, 20:43 GMT
1999: the year of the net

Big sales of net-friendly computers show demand to be online

By BBC News Online's Iain Rodger

  Click here to watch Declan Curry's report for BBC News

There is no doubt that 1999 has been a great year for the internet.

Business Review of the year
Huge numbers of people came online - particularly in Europe - and suddenly it seemed everybody wanted to set up an internet company or buy shares in one.

Top retailers and financial services companies are doing really well online
Toby Strauss, internet analyst
If there is a critical number of users any technology must have before it becomes "mainstream", 1999 brought that watershed within touching distance.

The year ended with a report by the retail consultants, Verdict, forecasting 10-fold growth in online consumer spending over the next five years.

With broadband, games will be played in cyberspace
Even though teething troubles made buying on the internet a frustrating experience for many people this Christmas, demand is growing at levels that have galvanised the business world.

Thanks to the rapid growth of "free" internet service providers (ISPs) - pioneered by Freeserve - net use is estimated to have risen by almost a third in Europe during 1999, compared with less than 10% in the US.

In the UK, an ICM poll for the Guardian newspaper found that 37% of adults used the internet either at home or at work, and that almost half the adult population - 21 million people - are "likely to be online by the end of next year".

The internet did not so much come of age as come of youth in 1999
Ivo Philipps, Screentrade
Ivo Philipps of online financial services company Screentrade says the number of customers began to take off a year ago, with 30% to 40% growth early in 1999.

He says there will be numerous internet launches and flotations in the first quarter of 2000, with further "phenomenal" growth over the next two years.

Soaring stocks

Expectations of high profitability to come have fuelled unprecedented demand for shares in internet companies, culminating in the 880% rise in share value when internet investment firm JellyWorks floated in London this month.

Even loss-makers such as Amazon have seen investors scrambling for their stock, and there has been concern that some internet companies are hugely overvalued.

Toby Strauss, internet analyst at mortgage brokers John Charcol, says some are, largely as a result of demand, exceeding supply.

"If, say, 10% of a company is floated and the price is bid up by excessive demand, to get the market valuation of the company you then have to multiply an already inflated figure by 10. This accentuates the problem."

On the horizon

Of course, the "free" ISPs that kick-started this year's boom in internet access are not really free while call charges are levied on connection time.

There are about 2,000 free ISPs in the EU
Merrill Lynch
But unmetered access is now on the horizon and that will require the ISPs to restructure or go bust, as their stream of income from the phone companies is turned off.

Early in the New Year, BT is due to begin offering unmetered surfing for a flat monthly fee, and later on faster, higher-quality access will gradually become more widely available through broadband services.

Broadband is the name given to the higher bandwidth links to the internet which are forecast to make universal access to broadcast quality audio and video, films on demand - and even virtual sales assistants - a reality via the internet.

If 1999 was the year of the online retail explosion, 2000 will be the year of the online media explosion.
Toby Strauss, internet analyst
The development of the network carrying internet traffic is one of the fastest changing areas of e-commerce, and 2000 will see service providers and telecoms companies battling hard to win ownership of as much equipment as possible.

Also helping to shape developments in the coming year will be the Bluetooth consortium of Ericsson, Intel, IBM, Nokia and Toshiba.

Bluetooth is a system based on radio links which enables small portable devices such as laptops, handheld computers and mobile phones to communicate without wires.


WAP technology (Wireless Application Protocol) linking mobiles to the internet will further revolutionise the range of services available to the public, while the development of interactive television also increases the penetration of the internet into the home.

Microsoft chief Bill Gates addresses Comdex 99
One area sure to be under the spotlight is security. The growth of e-commerce will be hindered unless reliable security standards can be established to protect electronic transmissions of personal information, such as credit-card details.

The UK government has signalled its concern over this, and other internet regulation issues, through the importance it has given to the Electronic Communications Bill currently being hastened through Parliament.

There are also detailed international negotiations going on over how to settle the question of where tax is paid by internet companies operating globally with no clearly identifiable physical base.

It's only just begun

So although 1999 has been a watershed year, there is clearly much, much more to come.

Technology is not what's driving the market any more. It's what people want - and they want convenience
Linux founder,
Linus Torvalds
As larger numbers of people start to use the internet, competition hots up for those companies aiming to cash in by offering online services.

Next year is likely to be characterised by consumers becoming more demanding about how they want internet technology to work for them.

In a keynote speech at Comdex 99 - the IT industry exhibition held in Las Vegas last month - the founder of the Linux operating system, Linus Torvalds, hit the nail on the head.

He said: "What really sets the boundaries and drives things are the users. Technology is not what's driving the market any more. It's what people want - and they want convenience."

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See also:
06 Dec 99 |  Business
UK internet shopping set to boom
01 Nov 99 |  The Economy
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E-business: opportunity or peril?
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Internet security boon
20 Dec 99 |  Business
Amazon founder wins accolade
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Coming soon: The e-levator
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Jelly Works rapid rise

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