2 thestreet.com articles. Internet Catching Fire in Europe
thestreet.com
thestreet.com
By Ned Stafford
Special to TheStreet.com
5/25/98 12:15 AM ET
FRANKFURT -- It hasn't yet become an epidemic, but
Internet fever is spreading across Europe.
"Growth is much faster than we expected," says Carsten Hejndorf, research manager for International Data Corp.'s European Internet Program in Copenhagen. "The Internet in Europe has reached critical mass, and we now have a snowball effect."
IDC, an IT market research and consulting firm based in
Framingham, Mass., in December estimated Western
European (the EU plus Switzerland and Norway)
Internet users at 21.2 million people, and expected a total
of 27.5 million by the end of 1998. But the unexpected
surge means IDC will have to raise Internet growth
forecasts.
Hejndorf expects an ongoing survey, due out in August, to
show growth at least 25% higher than December's
forecast. IDC's forecast of 59 million European Internet
users by the end of 2001 also will likely be revised up, he
says.
The EU is highly developed, wealthy and huge, with a
population of 373 million compared with 270 million
Americans. Furthermore, EU gross domestic product in
1997 was $7.52 trillion, larger than U.S. GDP of $6.66
trillion.
You don't need to be a rocket scientist -- or, for that
matter, a 27-year-old computer nerd in T-shirt ruling a
multimillion-dollar Internet startup -- to figure out the virtual
reality of the EU numbers.
U.S. companies want a piece of European growth.
"Our view is that there is tremendous growth potential in
Europe," says Fabiola Arredondo, managing director for
Yahoo! Europe in London. "We are growing very, very
rapidly."
Yahoo!, which already operates in the U.K. and Ireland,
Germany, France, Sweden, Norway and Denmark,
added local-language content in Italy in April.
Could the EU numbers -- and potential riches -- be why
U.S. titans such as Microsoft's (MSFT:Nasdaq) Bill
Gates have toured Europe urging increased efforts to
promote information technology? Nah. Bill probably just
likes the pie in Brussels.
Joe Sawyer, analyst for Forrester Research's recently
opened European New Media Strategies office in
Amsterdam, sees Internet revenue in Western Europe
growing from $1.2 billion this year to $64.4 billion by 2001.
Calling the 2001 forecast conservative, he said $56.7
billion will be from business trade, $4.6 billion from
consumer retail, and $3.1 billion from content.
Though impressive numbers, they still lag the U.S.
Cambridge, Mass.-based Forrester expects the U.S. to
reach $206.8 billion in Internet revenue in 2001.
Most observers agree Europe also lags the U.S. in
information technology, with one measure being computer
penetration. About one in four Western European
households has a PC, compared with around 42%-45% in
the U.S. And the North-South gap in Europe is huge. PC
leader Denmark had 50.3 PCs per 100 people, while last
place Greece had only 5.7.
The Scandinavian nations are generally the most
advanced in Europe in IT and have the most Internet users
as percentage of population. The Netherlands comes
next, with the U.K. and Germany in the middle of the EU
technological/Internet spectrum. France and then the
southern EU nations are at the bottom.
But European PC sales are surging, and many analysts
link the strong demand to Internet fever. First-quarter
factory PC shipments to Western Europe were up 19%
from a year ago, following a 20% gain in the fourth quarter,
according to Ian Darbyshire, manager of IDC's quarterly
Europe, Middle East and Africa PC Tracker Program.
There are indications that second-quarter growth is
continuing strong with the arrival of the sub-$1,000 PC in
Europe.
That's not the only thing expected to smooth the way.
Most expect the EU single currency -- the euro -- to give
European Internet growth and e-commerce a boost. The
euro will make trading across borders simpler, and force
down prices for goods and services through increased
price transparency and competition.
Keith Woolcock, technology analyst at Merrill Lynch in
London, agrees. And he said the euro also will make it
easier for American Internet-related companies to expand
in Europe.
"They are going to come in and mop up," he says.
Jochen Kubosch, spokesman for the EU's top
telecommunications official, says the EU has laid the
political groundwork to foster Internet growth in Europe,
noting the EU's decision to deregulate
telecommunications at the start of the year.
There are hurdles, still. The high local telephone fees are
the biggest factor keeping European Internet usage from
becoming a full-blown epidemic, most analysts say.
"The cost of local calls is a huge, huge factor inhibiting
Internet growth in Europe. It is something that is keeping
the masses from jumping on board," says Nick Gibson,
an analyst at the investment bank Durlacher in London.
In Europe, the charge for local calls is not a flat monthly
fee for unlimited usage, but is based on the amount of
time spoken, or cruising the Web. (See related story.)
Ingo Reese, Hamburg-based spokesman for AOL
Bertelsmann Online, a joint venture of America Online
(AOL:NYSE) and the German media giant Bertelsmann
AG, says German subscribers averaged only about seven
hours online a month.
But nobody expects telephone companies to slash prices
and give up such a huge source of revenue anytime soon.
Alternatives for cheaper Internet access are being studied
-- such as cable TV modems, existing electrical lines and
radio transmissions -- but are at least a year away.
Ned Stafford, a veteran journalist living in Germany, has
worked for wire services including Bridge.
________________________________________________________________
Across the Street: Care to Surf the
Web in Europe? Check Your Bank
Account First
By Ned Stafford
Special to TheStreet.com
5/25/98 12:15 AM ET
FRANKFURT -- Serious cybersurfers in Europe must dig
deep to support their habit. The Internet here does not
come cheap.
The biggest ISP in Germany is Deutsche Telekom
Online (T-Online), which has 2.1 million subscribers and
is owned by the main telephone company, Deutsche
Telekom (DT:NYSE ADR). T-Online charges a flat $4.50
(8 German marks) a month, plus $1.70 (3 marks) for each
hour of Internet use. So if you surf 10 hours a week, your
monthly bill (40 hours) would be $72.50. That's right,
$72.50.
But wait. You're not finished paying yet. Deutsche
Telekom also wants a cut. In Europe, local telephone
calls -- even from your computer to your ISP -- are
expensive. Weekday local calls from 9 a.m. to 6 p.m.
cost $2.70 per hour, from 6 to 9 p.m. and 5 to 9 a.m.
$1.62 per hour, and from 9 p.m. to 5 a.m. $1.00 per hour.
On weekends you pay $1.62 per hour from 5 a.m. to 9
p.m. and $1.00 per hour after 9 p.m.
If you're a night owl, only prowling the Web after 9 p.m.,
your 40 hours of local calling time will cost $40, for a total
monthly Internet bill of $112.50. But say you go online
only during the day during the week, your 40 hours local
phone time will cost you $108, for a total monthly Internet
bill of $180.50. Ouch.
Deutsche Telekom does allow customers to buy up to 20
hours of local calling time in advance each month, with a
50% savings on daytime rates and 16% on evening rates.
But even if you were smart enough to buy the maximum
20 hours for your daytime calls, your 40-hour Internet bill
would only fall to $153.50 from $180.50.
Maybe it's time to shop around for another ISP. How
about AOL Bertelsmann in Germany? The flat monthly
fee of $5.50 (9.90 marks) gives you two free hours of
online time. Wow. This is looking good. But wait a
second. What's this? After the two free hours are used,
the cost per each additional hour is $3.35 (6 marks).
Hmmm. AOL Bertelsmann gets $132.80 for 40 hours. And
don't forget to pay Deutsche Telekom. And if you and the
kids surf 60 hours a month, 80 hours...
Maybe there are cheaper ways to kill time in Europe. Hey,
anyone up for a weekend trip to Paris?
Ned Stafford, a veteran journalist living in Germany, has
worked for wire services including Bridge. |
