UK dial-up use 'down but not out'

Broadband has begun to whittle away at dial-up Internet growth in Europe, but ISPs still have a difficult time ahead of them persuading users to switch, says IDC

Broadband services have begun to eat away at the traditional dial-up market in most Western European countries, but dial-up services will be a significant market for some time to come -- and are continuing to grow in some countries -- according to research published by IDC on Thursday.

The slow decline of dial-up and the steady growth of broadband will add up to substantial growth in overall consumer Internet connections through 2007, IDC projects. It sees broadband increasing at 36 percent CAGR (compound annual growth rate) to nearly 50 million connections over the next four years. Consumer dial-up connections are projected to decline by 9 percent a year from 52.5 million connections at the end of last year to 34.2 million in 2007.

Migration to broadband in the UK has been steady but slower than in some other European countries, such as the Netherlands, said analyst Chris Drake. This is in part because the introduction of flat-rate dial-up services created a low-cost, simple way for large numbers of people to get online, and many of these users see no reason to switch to broadband.

"There is a very large sector of the population of Internet users who don't see any need to move to broadband based on their usage, and on the amount they would pay for a broadband connection," Drake said. "Prices are still considered relatively high."

He also noted that there are psychological hurdles to switching for many users, with the process of getting a broadband connection considered complicated by some.

IDC sees UK broadband growth accelerating this year or next year, but success depends largely on whether ISPs can convince dial-up users to make the jump. "More work is needed to convince dial users of the benefits of broadband," he said. "There is a need for ISPs to consider offering content services to dial users, to whet their appetite, and give them an insight into how they could benefit from a faster connection."

Drake noted that while dial-up is on the decline generally, it actually has a strong growth potential in some countries that don't yet have flat-rate services, such as Belgium. Ireland only introduced flat-rate dial-up last year. "In countries where flat-rate dial doesn't exist, online household figures tend to be low," he said. "There is a case for introducing flat-rate into those countries, as there are sectors that have not yet been tapped into."

Overall Internet penetration in Western Europe will grow from 44 percent in 2003 to 52 percent in 2007, IDC projected, with the UK rising from 56 percent to 64 percent. Penetration in France will grow from 36 percent to 46 percent and in Germany from 47 percent to 53 percent. UK penetration is higher partly because of the earlier introduction of flat-rate services, Drake said.