LONDON -- Although the decline of consumer dial Internet access - relative to broadband Internet access - is now well underway, it will be a long-term process, and consumer dial services are unlikely to disappear any time soon. This is just one of the predictions made in IDC's latest study, entitled Western Europe Consumer ISP Market Analysis, 2003. The study suggests that the decline in dial has started across most of Western Europe, as the uptake of broadband begins to have an effect on the shape of the market. Nevertheless, in some markets dial services continue to grow, and in recent months the market has even seen the introduction of new flat-rate dial offerings and wholesale FRIACO (flat rate Internet access call origination) products.

The ongoing importance of dial services needs to be clearly understood by the market's leading consumer ISPs, many of which continue to put an overriding emphasis on their broadband service portfolios. Of the four largest ISPs, Tiscali's and AOL's broadband customers represented 7% and 9% of their total Western European (consumer) customer base at the end of 2Q03. In contrast, incumbent-owned T-Online's and Wanadoo's broadband customers represented 25% and 20% of their total (consumer) Internet customers. Meanwhile, in their home markets the broadband share of the total is considerably higher, with broadband users representing 28% of T-Online's Internet consumer customers in Germany and 33% of Wanadoo's consumer customers in France.

In Germany, T-Online faces competition from freenet.de, which launched a broadband service in 1Q03, and Arcor, whose broadband customers represented just 3% of total active users. Meanwhile in France, Wanadoo's second largest dial competitor, Free.fr, had a broadband customer base that represented 7% of its total customer base. These differences demonstrate the extent to which the incumbents have a lead on their main dial competitors in the area of broadband service rollout. They also demonstrate the extent to which many ISPs will continue to be dependent on revenue from dial services in the short to medium term.

The study asserts that, between 2003 and 2007, Internet usage in Western Europe will continue to grow. According to Chris Drake, a senior analyst with IDC's European IP Services research service, "As providers of both dial and broadband services seek to migrate their dial customers to broadband, they must ensure that they continue to support the needs of dial customers. Some providers are already discovering that disillusionment with their dial service can lead to churn, with dial customers moving to the broadband (or dial) offerings of rival ISPs." Drake suggested that "it remains the case that many Internet access consumers have no immediate intention or even ability to migrate to broadband. ISPs therefore need to ensure that a broad range of dial access offerings and pricing plans are available, and that the introduction of new value-added services and online content is not purely reserved for broadband customers."

IDC