INTRODUCTION >>>

- Spreading the net -
The rapid uptake of new technology in Europe is opening up innovative ways of doing business

Many Europeans of the older generation can remember how long it took for the telephone to make a substantial improvement to their lives. Today it has become indispensable. Mobile phones and the internet offer new ways of conducting business and personal relationships – and their uptake is spreading rapidly from Sweden to the Netherlands, from Ireland and Italy to Turkey. The downturn in the financial markets may have dampened enthusiasm for hi-tech stocks, but there is no turning back the clock. While the young are eagerly exploring a cyberworld largely unknown to their parents and buying cellphones like fashion items, the use of the internet is spreading throughout the business world. With its single standard for mobile telephony Europe is ahead of the US, but European manufacturers and network operators are maintaining a close watch on technological developments knowing that, within a year or two, next-generation communications will mark a major shift in consumer habits.

The level of penetration of mobile phones varies considerably across Europe, but is expanding rapidly everywhere. Norway and Sweden lead with rates of 80 per cent and 76 per cent respectively. In the Republic of Ireland the number of users has risen to 67 per cent of the population – 2.4 million people – while in Turkey 25 million users are expected this year. The world’s major mobile phone manufacturers are in Europe, their strength underpinned by the European GSM (global system for mobile communications) standard. Around 40 per cent of the half-a-billion GSM users worldwide are connected over a network supplied by the Swedish firm, Ericsson. There is keen awareness in the communications industry that the globalisation of information technology will require manufacturers, suppliers and service operators to consolidate their market niche or be overtaken by a multinationals.

While even the biggest hi-tech companies have been cutting back jobs and reassessing their plans, analysts believe the sector is immune to a sustained downturn. Frank Cronin, chief executive of the Irish Internet Association, says: “There has been a slowdown and, as a consequence, some companies are going out of business. But overall, and judging by the number of people who have been employed to develop the internet, we are on pretty good ground.” A survey by PricewaterhouseCoopers confirms that even the dot.com downturn may not be as bad as it seems. The PWC study finds more internet companies becoming profitable, although the gap between the strongest and the weakest has started to widen as the European market enters a new stage of maturity. “Investors should remember that internet companies are still growing 14 times faster than the European economy as a whole and, in an exceptionally short space of time, have created a market cap of 66 billion euros – equivalent to the entire capitalization of the Lisbon stock exchange,” says PWC partner Kevin Ellis. Use of the internet in Europe is “growing explosively”, according to a study commissioned by AOL Europe and Roper Starch Worldwide. The survey found that 36 per cent of users went online for the first time within the past year, and 20 per cent in the past six months. More than half of European users said they had made a purchase online and 43 per cent use email within Europe.

More than half of users have made a purchase online

Another recent report, from the global market intelligence firm IDC, found that 30 per cent of the entire population of Europe – some 117 million Europeans – were using the internet at the end of 2000. The figure is forecast to double by the end of 2004. Internet commerce is expected to exceed $1 trillion in the next three years, with the deployment rate of business intelligence software rising from its current 15 per cent to 50 per cent. The internet has become an integral part of financial services and consumers are showing increasing pragmatism when it comes to international banking. Patrick Desmares, director of the European banking association EFMA, says a profile is emerging of “a single European consumer”. The association commissioned a recent study in conjunction with Cisco Systems, Arthur Andersen and NovaMetrie. Around 1,400 consumers from seven EU countries participated, all regular users of online financial services. The survey says penetration rates confirm that the internet is “gradually taking the place of the classic banking relationship”. Analysts speak of a ‘realignment’ or ‘reassessment’ of where hi-tech is now heading.

Many believe the future lies with wireless technology and are eagerly awaiting the arrival of a highly sophisticated communications tool known as the 3G (third generation) mobile phone. It may, however, take a little longer than forecast to roll out the networks and convince potential customers of its benefits. There are currently about 3.5 million users of high-speed, or broadband, internet in Europe, but rollout has been hampered by lack of competition among operators. Some analysts predict that the adoption of the broadband technology will be slower than most current projections, reaching the 10 million mark by 2003. Countries that are already advanced in broadband use are likely to increase penetration rates faster. These nations, which happen to be among the wealthiest in Europe, include Sweden, Norway and Finland, where 30 per cent of households will be using broadband by 2005. Erkki Liikanen, EU Commissioner for IT, believes it will be at least four years before Europe becomes a global competitor in all forms of internet access. “As far as broadband is concerned, the US has a clear lead, but there is a difference of about a year and a half in terms of internet access,” he says. “America’s penetration rate is about 40 per cent while ours is around 28 per cent.”