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Friday, 29 November, 2002, 12:37 GMT
Broadband reaches key milestone
Extract from BT's TV broadband advertising campaign
Will BT hit its targets for broadband?
BT is celebrating after reaching half a million broadband customers but experts warn that the champagne may need to be kept on ice for a while.

A mobile phone firm based in Barking in east London became the 500,000th customer this week, putting BT on course for hitting its ambitious target of five million customers by 2006.

But analysts say reaching that figure could be hard, unless there is a further drop in the cost of broadband.

Persuading more people to get fast net connections is high on the agenda of the UK Government, as well as of many Internet Service Providers (ISPs) depending on the services to make profits.

Broadband via the telephone line, called ADSL, accounts for about 40% of total fast net connections in the UK and BT has ploughed millions into advertising the service.

Price is crucial

"The broadband bandwagon is now really gaining momentum, as awareness and demand are fuelled not only by our own intensive advertising and marketing but also that of other ISPs," said BT's new chief broadband officer Alison Ritchie.

Broadband targets
Government wants UK to be best place for broadband by 2005
All UK schools and GP surgeries connected to broadband by 2006
BT aims for five million broadband users by 2006
One million of these will be businesses
Two-thirds of NTL's broadband users on a 128k service
But analysts say BT will have its work cut out to reach its targets for broadband.

"Growth is going to have to increase to hit that target," said Dan Stevenson, analyst with Jupiter Research.

With BT's multi-million TV ad campaign in full swing, the firm is unlikely to get much more high profile than it is at the moment said Mr Stevenson.

Cutting prices could be the only answer, especially for its controversial direct access product which offers users a basic internet connection for 27 per month.

BT has pledged to connect half a million users to its no frills product - dubbed "no thrills" by insiders - by next summer.

So far just 35,000 customers have signed up.

"It won't achieve half a million unless it becomes cheaper," said Mr Stevenson, especially given that it is competing with service providers such as AOL and Freeserve which offer more services for the same price.

Analysts say cutting the cost of a monthly subscription from 27 to 20 could make broadband more attractive to consumers.

Content dilemma

Napster's website with CD
Illegal file-sharing is most popular content
Price is going to be crucial if providers want to convince users to make the switch to broadband not least because their hands are tied when it comes to content said Mr Stevenson.

"The killer application of broadband at the moment is illegitimate file-sharing which ISPs can neither promote nor make money out of," he said.

Jupiter estimates that up to 38% of broadband users use their connection for illegal file swapping and ISPs put the figure even higher at more than 50%.

Dark secret

The government was celebrating its own broadband milestone earlier this year as it announced that one million Britons had fast net connections.

These figures are slightly skewed however said Adam Daum, analyst with Gartner Group.

"There is a dark secret in the broadband world that NTL is including its 128k product in its figures which clearly is not broadband," he said.

"There has been a conspiracy to include it to make the figures look better," he added.

BT is also planning to offer a 128k service, called Midband, next year. Although the figures would count towards its broadband total, it has no plans to include them.

It does however include businesses in its recent half a million milestone and towards its five million target.

Currently BT is connecting around 20,000 users to ADSL every week. About half of these are via its own ISP BTopenworld and the rest is made up from wholesale connections from ISPs such as AOL and Freeserve.

Cable accounts for about 60% of the broadband market in the UK.

Take-up of ADSL is up 300% since this time last year and the price has already fallen by around 30% according to a recent report commissioned by the government.

See also:

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