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To: Glenn D. Rudolph who wrote (41687)	2/22/1999 7:48:00 AM
From: Glenn D. Rudolph	Respond to of 164685

ANALYSIS-Companies race to tap new Internet users By Neil Winton, Science and Technology Correspondent LONDON, Feb 22 (Reuters) - Millions of Europeans will be joining the Internet in the next couple of years, and the race is on for a share of the cash they are likely to spend on online shopping and services. Some 40 percent of European households will be able to access the Internet in 2002, compared with about 13 percent currently, according to consultants Jupiter Communications. They will form a potentially huge, untapped market for imaginative companies able to provide services that grab their attention. Telephone companies are likely to be early winners, but to attract and retain customers Internet service providers must provide compelling reasons to sign up, said Nick Jones, a Jupiter analyst. "America Online Inc <AOL.N> must be considered a serious competitor, and traditional (U.S.) portal sites like Yahoo Inc <YHOO.O>) and Lycos (<LCOS.O>) with its portfolio of web sites," said Jones. The key to success is being first, as the experience of America Online shows. In Britain, electrical retail chain Dixons Group <DXNS.L>, won rave reviews from investors by introducing the first free Internet access service, Freeserve, last September. In five months Freeserve had signed up more than one million freshman Internauts, and added around $5 billion to the retailer's stock market value. FREE ACCESS SEEN LIMITED Experts see little chance of free access becoming more than just a rare boon in mainland Europe, where telecommunications infrastructures are often less conducive to enterprise than in Britain or the U.S. A smattering of free Internet service providers exist in France and Germany, though the cost of the service depends more on national regulatory environments and how liberal telecommunications markets are, said Adam Daum of market research consultancy Inteco. If advertising revenue is not available to cut the access costs for customers this will inhibit the growth of electronic commerce in Europe, he said. In addition, high local phone call charges in Europe could make many Europeans more selective over use of the Internet than for example users in the U.S., where local calls are often free, he said. This could hold back online activities that advertisers prefer, such as chat rooms, Daum added. MEDIA COMPANIES HAVE EDGE Traditional European media companies like Bertelsmann <BTGGga.F>, with coherent web strategies and an international outlook are likely to take the lead, not only because of the content they can provide, but because of their ability to tap mass markets fast. "The key to success is to be able to acquire large numbers of consumers at low cost. That's why Dixons was so successful - it had a large retail chain to distribute CDs through, said Jupiter's Jones. Daum sees success for Line One, an Internet portal grouping News Corp <NCP.AX>, British Telecommunications Plc <BT.L> and United News & Media Plc <UNWS.L>. Daum pointed out that AOL had to jump start its business with an expensive mail shot to millions of prospective customers with free CDs. Outfits like Line One can avoid that. "Line One will use all those newspaper and magazine readers and insert a free CD. That is a low cost way to reach millions of people." Winners will also be those that get to consumers first. "The important characteristic of winners is being early. Dixons got the inside track by innovation. Having a customer base you can easily access at low cost. That's important," said Michael Wilshire of management consultants McKinsey and Co. REUTERS Rtr 04:01 02-22-99