2001: Where's the money?

The slump that started with tech stocks in the spring of 2000 may be about to bottom out, or it could continue for months. The big new-economy question for 2001 will be: what is the extent of the damage?

Analysts expect the first half to be a bloodbath, with dot-com closures proceeding apace. It's now clear that the slump is tied to a broader slowdown in the US and European economies.

So far business-to-business e-commerce companies have been viewed as somewhat safer than business-to-consumer, with higher margins and greater stability. But that notion will no doubt be challenged in the coming year as the shakeout continues to spread.

For telecoms companies, the most pressing issue will be how to deal with mounting debts brought on by 3G auctions. Companies like British Telecommunications and Vodafone have spent billions acquiring licences that are not expected to generate revenue in the near future. What's more, they face another round of costs when work begins on the 3G infrastructure. Telcos will continue to grapple with the credit crunch and some may default on loans.

Connectivity will remain in the spotlight, as the British Internet infrastructure moves from a pay-by-the-minute, dial-up world towards Friaco, the US-style flat-rate scheme, and always-on broadband connections.

Friaco (Flat-Rate Internet Access Call Origination) will fully come into place in April. BT will continue to connect new customers to ADSL, the broadband system that runs on standard telephone lines, working through its enormous backlog.

In July competing telcos will no longer have to depend on BT to provide unmetered and ADSL services as they will have access to BT's local exchanges, after the unbundling of the local loop.

Despite all these advances, however, progress towards cheaper, better Internet access is likely to be as sluggish as it was this year. BT has consistently dragged its feet on unbundling and unmetered, with little serious challenge from the government. As for ADSL, the technology is far from bug-free and it will take months to build up the engineering expertise to carry out hassle-free installations.

The mobile Internet, which left businesses and consumers un-wowed in 2000, will gather steam in 2001. WAP may continue to be crap but fresh ideas will arrive from Japan's NTT DoCoMo, which is expanding into the US and Europe.

Even without a killer application, the few things that mobile data is good for -- news headlines on your mobile, connecting your laptop or handheld for wireless email and Web surfing -- will move closer to the mainstream. GPRS (general packet radio service), which will begin to trickle in next year, will make all this faster and more convenient, as will Bluetooth.

M-commerce is unlikely to make great inroads in the next 12 months, however.

Question marks still hang over Bluetooth, the short-range radio technology for connecting PCs, mobile devices and peripherals. The technology has failed to take off so far, held back by costs and technical issues. In the end its range and bandwidth limitations may make it more suitable for consumer devices, while wireless LANs could fill most business needs.

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