BusinessWeek article. FINALLY, EUROPEANS ARE STORMING THE NET
The region looks like the next great cyberspace growth market
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It's 8:58 p.m., and from Berlin to Munich to tiny Black Forest hamlets, German
Internauts are booting up their PCs. Their chat rooms have been practically
deserted until now. But after the two minutes it takes to make modem
connections, they will be as lively as Bavarian beer halls. ''There's a tremendous
surge of online activity at nine o'clock in Germany,'' says Jack Davies, president
of AOL International. Why so? It's at 9 p.m. that German phone rates drop by
half.
Europeans, long cyberspace holdouts, are rushing onto the Net. It started with
companies, from German auto giants to banks in the City of London, that are
wiring together customers and suppliers in networks. With appetites whetted,
employees are subscribing in increasing numbers to online services, which are
hurrying to come up with offerings in European languages. Net subscriptions in
Europe are growing at 30% annually, even though high rates push up the average
outlay to $75 a month--triple a U.S. rate that allows unlimited Internet access on
free local lines.
Europe, in short, looks like the next growth market for cyberspace. If
deregulation cuts prices, as expected, cheaper phones--or cable or satellite
connections that circumvent phones--should draw consumers online. The most
dramatic growth is likely to be in company-to-company electronic commerce.
Forrester Research, a U.S. technology researcher with a unit in Amsterdam,
predicts that online business of $1.2 billion this year will be worth $64.4 billion by
2001. ''There's incredible pent-up demand,'' says James Richardson, president of
Cisco Systems Inc.'s European operations.
Internet companies are rushing into the fray. Partnered with German media giant
Bertelsmann since 1995, AOL is taking on giants Deutsche Telekom and France
Telecom. When AOL purchased CompuServe Inc. in February, it nearly doubled
its European base, to 2 million. In the race to wire the Continent for the Net,
outfits such as Cisco and Lucent Technologies are battling France's Alcatel and
Germany's Siemens. What's more, as Europe's businesses invest some $125
billion to prepare computers for the euro, they're also putting the businesses
online. For Casa Gancia, a 150-year-old Italian winemaker, the Internet replaces
annual communications traffic of 35,000 faxes and letters between its offices,
warehouses, and agents. It is now extending the network to 60 countries.
SKIP A STAGE. In both home and business applications, analysts estimate,
Europe is about four years behind the U.S. in cyberspace. In Germany, France,
and Britain, barely a fifth of homes have PCs, while in the U.S., the figure is
nearer half. Internet usage is still just 7% in Germany, 6% in Britain, and 2% in
France, compared with 25% in the U.S. But Europe could catch up fast. It may
not have to follow the U.S. through a step-by-step evolution of chips and
modems, for instance. Instead, Europeans can buy their way into the state of the
art. ''To some extent, Europeans will move faster because they don't have to go
through the pioneer stage,'' says William A. Etherington, general manager of
IBM's Europe division.
In fact, many Europeans may skip the PC stage and jump to the Web through
alternative devices. Alcatel wowed the crowd at Germany's Cebit computer
show last March with a telephone equipped with a screen and built for
Web-surfing. L.M. Ericsson and Nokia Corp. are promoting their latest cellular
phones as Web machines.
For many Europeans, though, the most likely path to the Net is the old telly.
British Telecommunications PLC, which has teamed up with Microsoft Corp.'s
WebTV, predicts that TV access to the Internet in Britain will grow from zero
now to 3.5 million subscribers in four years. That's twice the number of current
Net surfers using PCs. Cable & Wireless Communications PLC has hooked up
with U.S.-based Network Computer Inc., an Oracle and Netscape
Communications affiliate, for its autumn, 1998, digital TV launch. C&W intends
to offer TV-based Internet access within the next 12 months.
EASY TO WIRE. Even as consumers sort through these choices, businesses are
pressing ahead. Multinationals have been moving online for the past five years. In
April, Amazon.com, the online bookseller, announced that it would purchase
three European companies--two in Britain, one in Germany--to build European
book and video sales. And to compete in a united Europe, small companies have
to catch up. Further, many of them are adopting software systems--including
products by Oracle, Baan, and SAP--that virtually thrust them into networks.
One added benefit for businesses: They're the first beneficiaries of telecom
reform. Throughout the Continent, new competitors are targeting business
customers with discount services. Businesses are easier to wire and provide far
greater traffic than the unwieldy consumer market. ''You get to business
customers with a much smaller investment,'' says Aldo Peterson, chief executive
at Telepartner, a Danish company that discounts phone services.
The trouble for consumers is that while many former monopolies, including
Spain's Telefonica, are lowering long-distance fares, they're compensating by
jacking up local rates. ''There has to be a balance,'' says Luis Lopez von Damm,
CEO of Telefonica Internacional, the company's European joint venture with
WorldCom Inc. In the meantime, prices limit the number of Net surfers in some
countries.
Europeans have long resisted the Internet as a phenomenon of limited value.
Now, as they warm to the Net, they're likely to imprint their culture--as well as
their languages--on cyberspace. And with time, maybe they won't have to wait
until 9 p.m. to switch on.
By Stephen Baker in Paris, with Joan Warner in Frankfurt and Heidi
Dawley in London
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Updated Apr. 30, 1998 by bwwebmaster
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