Broadband rewrites the rules

For 39.99 a month, BTopenworld subscribers will enjoy an ‘always-on', high-speed internet link, as well as gaining access to consumer and business portals with specially designed content and applications. Faster access will be introduced in Autumn 2000, with more personalisation, richer content and TV-based services brought in from December 2000.

Of course, BTopenworld won't be the UK's first broadband service. The cable networks Telewest, NTL and C&W each offer broadband, as does Kingston Communications in Hull. Chello, which runs broadband service in six European countries, is also thought to be considering a move into the UK. However, while Telewest is aiming to have just 40,000 broadband subscribers by the end of 2000, and 200,000 by the end of 2001, BTopenworld plans to recruit 1m subscribers over the next two years and push broadband into the mass market.

So why is broadband important - what will it mean for internet users, content providers, advertisers and e-tailers? For internet users there is the convenience of an ‘always-on', unmetered connection. High-speed access means that content - ranging from MP3 files to plug-ins and business applications - can be downloaded far more quickly than with a conventional modem connection. Additionally, broadband means that the type of content available over the net will become more and more ‘rich', including animation, video and high-quality audio.

This has important implications for content producers. Broadband is likely to accelerate the convergence between the web and TV, unlocking the internet's potential as an entertainment medium - as anticipated by the AOL/Time Warner merger. BTopenworld has signed up more than 50 companies, many of them entertainment-oriented, to provide broadband content to its portals. Among them are Pearson TV, 365, eBay, Carlton, Sportal, CNN and the Cartoon Network. The latter will produce online cartoons - including versions of The Banana Splits, The Flintstone and Scooby-Doo - that are interactive and allow viewers to, for example, determine the outcome of a programme.

Alongside the big media groups, new players are gaining footholds in this hybrid, web/TV environment. AtomFilms, which recently produced Angry Kid, an internet-only cartoon for Aardman Animations, has a deal to provide BTopenworld with eight short films a month. BTopenworld is also working with Silicon Valley-based, Spotlife, to develop a ‘point, click and broadcast' internet-based personal broadcasting service. XPT, which produces the online soap, OnlineCaroline, is another player in this genre.

Broadband also changes the rules for e-commerce and online advertising - partly because broadband subscribers tend to spend longer online. Excite@Home, the US broadband network, found that its subscribers typically spend 20 hours a week online, 20% longer than dial-up users, while BTopenworld figures suggest that broadband subscribers will spend four times as long online as their narrowband counterparts. BT figures also indicate that broadband subscribers will spend two-and-a-half times as much on e-commerce as narrowband internet users. By 2004, BT estimates online spending by broadband subscribers could account for as much as 10% of UK consumer ‘wallet spend'.

With broadband, online advertisers will increasingly be able to use animation, video, interactivity and audio - and these ‘rich-media' banners, micro-sites and interstitials are thought to be more effective than conventional banner ads. According to Millward Brown Interactive, rich media banners are associated with improved brand perception and produce clickthrough rates that are 340% higher than for GIF banners. BTopenworld is to run rich-media advertising as well as content - and it expects that enhanced advertising and e-commerce revenues will allow it to break even within three years.

Of course, BT's position at the heart of all this is based on its monopoly over the local loop, a grip that it must relinquish by July 2001. In fact, earlier this year the Chancellor appeared to signal that the unbundling process might be brought forward, while the European Commission has indicated that it wants the local loop across Europe to be opened up by the end of 2000. In the meantime, we can expect to see BT to go hell-for-leather to capitalise on its first-mover advantage and try to secure an insurmountable lead in the broadband access market.