Jane Wakefield: Iceland's online Nirvana

Sixty-seven percent of Icelanders have Internet access at home, 84 percent have it, if not at home, then at work and school. ADSL was rolled out in December 1999 and, despite being years behind BT in terms of privatisation and competition, Iceland's telecoms market boasts some of the cheapest tariffs in the world.

It may be nearer to the Arctic Circle than most would find comfortable, it may have Magnus Magnusson as one of its most famous exports, but in terms of mobile use and Internet access, Iceland is streets ahead. What lessons can we learn as we struggle to get Internet access right in the UK and what is it that makes those snowflake jumper-clad Northerly folk so enthusiastic about the Net?

Olafur Stephensen, head of corporate communications at Siminn, Iceland's state-owned telco, believes Icelanders, in common with their other Scandanavian neighbours, are just very receptive to new technology. Managing director of voice and data services at Siminn Thor Thorisson has another theory. "There are many months of dark and being indoors," he says.

And as if to compensate them for the biting cold, Icelanders do not have to worry about the cost of going online. A local call in Iceland costs just 0.78 kroner per minute (0.006p) off peak and Siminn's Internet service costs £8 a month for as much access as users want. While there are only two or three competitors in most businesses in Iceland, there are ten ISPs, showing just how popular the market is. Siminn's mobile rival Tal for example offers an unmetered Internet service for around £10 a month.

Tal is the first real competition Siminn has faced and has helped to dramatically reduce the price of mobiles in Iceland. Iceland is European leader in mobile penetration, with 200,000 of Iceland's tiny 280,000 population having a mobile phone. Tal is also toying with rolling out a fixed line broadband service and is currently in talks with Icelandic electricity companies about the possibility of using its power lines to carry the service.

Siminn could certainly teach BT a lesson about ADSL. It has had a service since 1999 and, while it is expensive (around £36 a month for a 512mbps connection, plus a monthly connectivity fee of £56) Siminn says it has had a good response to the service. For those that can't afford it, Siminn also offers a cable modem service which is considerably cheaper at around £30 a month.

In the UK there has been heated and angry debate over BT's slow rollout of ADSL. In Iceland the technology is so far rolled out in the south west, Iceland's most densely populated area. It covers all major Icelandic towns and reaches 65 percent of the population. By contrast BT's ADSL service will only reach 70 percent of the UK by the end of next year.

BT often moans that it is tied down by its Universal Service Agreement, meaning it has to deliver phone services to remote Scottish villages even if it is not likely to be cost effective. In Iceland Siminn is tied to even more stringent rules -- as part of its Universal Service Agreement it has to provide ISDN to every household. The idea that BT should be forced to make broadband universally available is currently being debated by Oftel, but BT is quick to dismiss it as an unreasonable request. Siminn is equally annoyed by its ISDN commitment. "Sometimes it would be cheaper to buy the farm," jokes Stephensen.

While BT has been privatised for over ten years, Siminn has faced just three years of competition. Despite this, it appears to have a more liberal approach. The state owned telco has made it a deliberate policy to keep phone tariffs low -- a fact acknowledged even by Siminn's rival Tal -- and the government is considering keeping the network that runs across the country in state hands unless Siminn can prove its commitment to wiring rural areas.

By contrast in the UK, the relationship between state, telco and the Internet seems to be an awkward one. According to Jupiter Media Metrix, an Internet measurement firm, ten million of the UK's 60 million population is online, which is a poor percentage compared to Iceland's wired nation. It could be argued that Iceland -- much smaller than the UK and with a much simpler telecoms market -- cannot be compared with Britain. However both Kingston, which is pretty much the exclusive telecoms provider in the Hull area (serving around 170,000) and Manx Telecom which serves the 70,000 inhabitants of the Isle of Man claim that Internet usage is fairly low in their areas. Kingston Internet estimates just six percent are wired.

While BT now claims it is leading the revolution in Internet access in Britain, it has always said that first and foremost it is in the business of making profit. In Iceland there appears to be a stronger grasp of the importance of Internet access beyond making money.

"The Internet has revolutionised Icelandic society," says Siminn's Stephensen. "It is a small country where previously elites had monopoly on information. The Internet has changed all that."

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