Page 1: Development of broadband markets
Companies like BT that build communication networks must also develop their markets in order to earn a return on their investment. BT is a business which must generate revenue and make a profit in order to satisfy the shareholders. The same principle applies to other public limited companies.
Initially broadband was developed for business customers. Businesses need to communicate vast quantities of information quickly and will often pay a premium for superior service thus encouraging technological developments. However, it became obvious that these advantages could also benefit consumer markets assuming the price was affordable. As more business users experienced the benefits of broadband they demanded similar services in the home market.
Adapting telephone exchanges for broadband is costly. Therefore the early development was in centres with a high concentration of web usage. The business model applied is based on consumer demand. This is assessed through BT Wholesale's broadband registration scheme. A threshold for demand is set based on the cost of providing ADSL broadband at individual exchanges. Once sufficient interest is registered the exchanges are upgraded. This scheme drives BT's roll out programme by matching supply to demand.
The consumer market for broadband is a growing one driven by:
- The availability of more affordable computers with better specifications.
- More affordable broadband access (average price only £20 - £30 per month).
- Government investment of £400 million in creating web awareness through a national network of UK Online Centres - where individuals can learn to access and use the Internet.
- The development of more interactive websites that require faster connections, such as downloads of music and gaming.
Today, over half of UK homes (around 12.5 million) have Internet access. In February 2004, there were 2 million wholesale broadband connections, providing a massive opportunity for growth. As Government and other organisations use the Internet to provide services and up-to-date information online, individuals increasingly feel they need to have fast reliable Internet access from home.
Through government initiatives it is now possible to complete a wide variety of tasks online e.g. UCAS forms for university application, access to Connexions cards, Income Tax forms and benefits applications. Many sports' governing bodies use websites to disseminate up-to-date information accurately and cheaply. The Internet has become, for many, the first point of reference for research, information (e.g. travel timetables, cinema times) and shopping - all this content is 'bandwidth hungry'.