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Thursday, 23 March, 2000, 18:11 GMT
High-speed net: Is it worth it?

Is logging on to the internet slowing you down?

BT and some UK cable providers like Telewest are betting that customers will pay 40-50 a month for constant and speedy internet access.

With a question mark over the viability of the free or unmetered dial-up services, internet service providers hope that people will pay what amounts to 500-600 a year for a premium service that is always on and has no delay in downloads.

Telewest says the improvement from using broadband is like driving down a 10-lane motorway instead of a winding city street, while BT compares broadband to colour versus black and white television.

In the US, widespread availability of broadband connections has meant that people often leave their computers on, linked to the internet, all the time.

New opportunities

Checking the traffic for your route to work - or for a weather forecast - becomes a reflex action without the prospect of a long connection or download time to deter usage.

For companies like Telewest, this technology also multiplies their revenue streams.

"You rapidly move away from subscription revenue to a multitude of revenues for the supplier," said Telewest chief executive Tony Illsley as he demonstrated the new technology at a City art gallery.

BT is also hoping for additional traffic. The internet has become a hugely important source of revenue for the company as more and more people log on. It has set up BT Openworld as a separate retail Internet service provider in order to enable it to make deals with other suppliers.

Surf Unlimited

But there are concerns that BT and Telewest can promote broadband services without undermining their own unmetered dial-up services.

BT's Surftime, for example, offers unmetered weekend and evening access for just 5.99 a month.

BT also gets a share of the revenue from other unmetered service providers like Freeserve - forcing some of them to withdraw from providing the service.

Since launching Surf Unlimited, its 10 a month unlimited dial-up internet package, Telewest customer numbers have more than doubled, as has each customer's usage.

But this has led to considerable delays and interruptions to the service.

Telewest's Mr Illsley says this was the result of greater than expected demand: "We went from 55,000 to more than 100,000 customers in a matter of days."

This time, he says, the launch is to be more gradual and will also be on a system designed to handle the traffic.

BT is also confident that after its huge initial investment, it can meet any capacity problems.

However, its broadband services will initially service a group of 50 customers bundled into one circuit running from the local exchange, so download times could slow down dramatically if everyone in the neighbourhood decides to download a video at the same time.

Costs

It all sounds good, but will people actually pay 600 a year for the broadband package?

BT Openworld's Ben Andradi says that once a large enough group of customers sign up, the price will begin to drop.

He is also offering different packages to business, including higher-speed services, at a higher price.

Small business users form a significant part of BT's target group.

Telewest's Mr Illsley anticipates that the price will come down in line with the price of cable modems - which are rented 'free' as part of the 50 a month.

The other avenue Telewest is likely to explore is extending its bundling of TV and telephone services to include broadband.

Quality dividend

One of the main reasons why people have been looking forward to broadband's arrival is the prospect of getting television quality video via the net.

Recent demonstrations have shown that broadband quality is immensely higher than the stilted, interrupted video clips most internet users have to settle for.

But it is still a fair way short of television quality - the point at which true convergence of TV, computer and telephone can happen.

With the lack of much content powerful enough to demonstrate the broadband capabilities, it has been video e-mails which have proved the most popular with users in America.

However, BT is determined to drive video content forward, doing deals with a wide range of providers to ensure that viewers can watch everything from pop videos to news reports live on the internet.

First in line

But with the continued availability of unlimited, almost free, dial-up internet access in the UK, a question remains over how many people will be willing to pay around 50 a month for a faster service.

Telewest's own forecast does not appear over-optimistic.

It has 1.6 million customers for its phone or TV services but expects to have just 40,000 broadband subscribers by the end of this year and 200,000 users by the end of 2001.

BT hopes to have one million users by the same time, and is relying on its 100,000 pre-registered users to launch the service.

But even for BT, it is something of a chicken and egg situation. Suppliers may be reluctant to invest in providing expensive broadband content until the number of viewers is large enough to make it commercially worthwhile.

But only then will customers believe it is worthwhile to sign up for the premium broadband service.

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23 Mar 00 | Business
Telewest speeds internet
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