July 30, 1998 1:50 PM PDT

Net demand surging in Europe

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June 10, 1998
European businesses and consumers will continue to spend more on Internet access as online audiences and demand for Internet services continue to surge into the next millennium, according to a new report.

Businesses are slated to outspend consumers, opening up opportunities for local ISPs to sell services to them.

Overall Internet access spending in Europe will climb from $2.5 billion in 1998 to $11.8 billion in 2001, according to the study conducted by Forrester Research.

As a result of this surge, the study urged local Internet service providers to begin offering differentiated services based on markets.

"Today, the ISP community in Europe--while it ranges from mom-and-pops to Deutsche Telekom--is not differentiated," said Chris Mines, an analyst with Forrester. "They have not yet figured out how to target different Internet access services for different customers. Even basic business and consumer distinctions are still not there.

"The opportunity is to start to focus and match up supplier capabilities and requirements with different kinds of customers," he added.

The study estimated that consumer spending in 1998 will reach $1.4 billion and rise to $4.6 billion in 2001. Businesses, on the other hand, are expected to spend $1.1 billion in 1998 and surpass consumers by spending $7.2 billion for Internet access in 2001.

In contrast to the United States, where the consumer Internet access market has been growing faster than the business market, the European consumer marketplace is confronted with different barriers that restrain it. Europe's consumer market is more fractured and localized compared to the United States.

The report added that market growth will be restrained because of lower PC penetration, high local phone rates, limited ISP choice, and common language and cultural barriers.

Within the business market, large and medium-sized businesses will spend the greatest share for access. Small businesses, on the other hand, will maintain their dial-up accounts and spend considerably less.

The factors that favor businesses over consumers include the imminent rollout of the Euro, as well as the acquisition and consolidation binge occurring among telecommunications companies, said Joe Sawyer, an analyst for Forrester's European New Media Strategies service.

The report also predicted that the big winners will be large-scale network and telecommunications providers. Multinational communications companies such as WorldCom and Qwest will reap most of the wealth from large and medium-sized businesses because of their price, service, and scalability, the report said.

"Companies like WorldCom and Qwest can make a pitch to large businesses that they're global performers," said Mines. "WorldCom's scaring the pants off local telecoms in Europe."

Today's report comes on the heels of one yesterday from Jupiter Communications, in which the firm predicted strong Net and e-commerce growth, particularly in Germany.

 

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