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Study cites broadband's needs in Europe

Demand for high-speed Internet access in Europe will rise, a study says, but more competition is needed among local telephone providers if consumers want better broadband technology.

The demand for high-speed Internet access in Europe will rise, according to a recent study, but more competition is needed among local telephone providers if consumers want better broadband technology.

Research firm Frost & Sullivan predicts that the number of broadband subscribers in Western Europe will grow from 3.8 million at the end of 2001 to 28.1 million in 2008.

The study predicts that the need for broadband will pick up in 2003 as the worldwide telecom slump softens and trends such as telecommuting spark demand from home-office workers.

Demand will also increase as Internet surfers see the value of broadband-specific services such as video-on-demand, VPNs (virtual private networks), home networking and voice-over-DSL, the study said.

But potential snags in the market threaten to impede progress. The report notes that more competition is needed in the local telephone market to compel carriers to upgrade their networks, which will drive better broadband technology into the hands of Internet surfers.

"The European Commission cites three key reasons why competition is making such slow progress in the European broadband market," Frost & Sullivan analyst David Tait wrote in the report. "This includes incumbent telcos exploiting first-mover advantage, predatory pricing and regulatory delaying tactics."

Established carriers have used their weight to bury or stifle the efforts of competitors, which hinders the market and impedes technology advancement, an issue that also confronts carriers and regulators in the United States.

As a possible antidote, government programs in Sweden exist to encourage "competition-neutral broadband networks," Tait points out. Cities can build optical fiber networks that are run by independent operators, which provide equal network access for all broadband providers.

Tait also urges governments to become more involved in building Europe's broadband infrastructure in rural and underserved markets through tax incentives to carriers, an idea that the U.S. Congress has debated as well.

"A strategy for achieving high broadband penetration in local networks is publicly funded fibre infrastructure and a strong competition policy for service providers to use the network," Tait wrote. "The end goal should be ubiquitous, state-of-the-art, affordable solutions to end-users. We believe that free competition is the way to achieve this goal."

But some analysts believe the debate remains open as to whether more government involvement will help broadband adoption in the United States. "One of the things we learned in the last five years is that competition is a much better driver of broadband than regulation," said Legg Mason analyst Blair Levin, who added that the release of U.S. broadband efforts has been impressive by historical standards, even though it might not have lived up to the high expectations of some using the Internet.

Sweden leads Western Europe in the penetration of broadband, according to Frost & Sullivan, followed by the Netherlands and Denmark.