Broadband is the next big thing in new EU countries
Despite their current low rates of broadband penetration, the ten new EU countries are poised for rapid growth in high-speed internet use, thanks to local political support, competition and relatively more affluent, urban, techno-literate middle class.
According to a recent report by the Boston, Massachusetts-based Yankee Group, the ten new EU member countries had an overall household broadband penetration rate of 1.9 percent at the end of 2003, compared to 12 percent in the other 15 member states. Yankee predicted that the new members could catch up with their neighbors or overtake them over the next five years.
The key factors in broadband development will be their relatively techno-savvy middle class, strong competition between incumbent operators and cable companies, and, perhaps, strong political support in some countries, which governments see high-speed internet access as an additional growth factor.
Apart from that, the new entrants must adhere to EU regulations in key areas, such as competitive provision of telecommunications and legislation covering those with significant market power, including all incumbents. Therefore, all of the new members must implement rules on local loop unbundling (LLU), potentially allowing new competitive service providers to enter the market and take market share from established providers, Yankee said.
The highest internet-penetration in the region is still in Estonia and in Slovenia. And Hungarian Matav is considered to be the most aggressive in pushing broadband. Its DSL subscriber base consisted of 104,000 at the end of 2003 and is expected to dramatically increase by the end of 2004.
In Poland there has been seen very rapid growth during the past 12 months, especially since local telco TPSA undertook serious price-cuts. Total DSL base (including business subscribers) grew to 270,000 at the end of 2003, but had reached 300,000 by the end of the first quarter of 2004. TPSA has also worked hard to extend access and claims that 75 percent of its phone lines are now DSL-enabled. It hopes to reach 600,000 subscribers by 2006. The strongest competition to TPSA comes from the cable TV companies in Poland.
Hungary, the Czech Republic and Poland account for 90 percent of the phone lines in the new accession region, and Poland alone accounts for 50 percent of phone lines, Yankee said.
Broadband penetration in the Czech Republic, Hungary and Poland will grow from around 2 percent at the end of 2003 to around 17 percent at the end of 2008. Yankee expects to see rapid growth in the next few years, and penetration in major urban centers could match that in the rest of the EU before 2008.
Mass-market “universal” broadband could take a lot longer—unless certain key impediments are removed. The cost of suitable PCs is a major barrier among the lower income groups, and terminal innovations, together with pay-as-you-go broadband, may be the only way to take penetration beyond the 20 percent range. Many regions in accession countries are entitled to financial support under EU Structural Funds programs, and this may be the best route to more widely available broadband, especially in remoter areas.
Alternative technologies to DSL and cable modems also may be necessary given that over one-quarter of households are unconnected. For these customers, powerline and broadband wireless are worth investigation in the longer term.
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