Europe’s Dirty Little Secret: Porn Is Prince

The new report by Forrester Research (NASDAQ: FORR) on broadband usage in Europe claims that technological and hardware issues aside, the main barrier to widespread acceptance of broadband is not cost, but lack of sufficient rich, broadband-specific content to allow consumers to justify the expense.

“Compelling content unavailable over dial-up could attract them, ” said Forrester analyst Lars Godell, the lead author of the report on potential European broadband customers, “but unresolved business issues around who gets paid, how and by whom discourage premium content providers like Carlton and BMG from offering audio, video or interactive games over broadband networks.”

Forrester’s Technographics Europe survey this April showed that the top three reasons why consumers with PCs at home don’t get Net access are “I don’t need to,” “I have no interest,” and “I have no desire to be connected.”

To be sure, companies such as Bertelsmann and Time-Warner, owners of large film libraries, are looking to explore new ways of exploiting their content in a European broadband marketplace.

But analysts differ in their take on where content for broadband will go. While Forrester is bullish on very rich, interactive video-on-demand and other TV-like programming for broadband, UK-based Yes Television and BTOpenworld announced that they will pilot BT Yes Television, to deliver VOD to televisions via ADSL-enhanced phone lines in London. And Filmgroup, a film distribution company competing for the same UK VOD audience via its web portal films2.com, announced its intention to float on the London Stock Exchange in the second quarter of 2000.

But Jupiter Communications research analyst, Noah Yasskin believes all these people may be barking up the wrong tree.

“Primarily, broadband will be an enhancement of existing applications and services, as opposed to some sort of TV-like revolution,” Yasskin said. “There will be some richer media, and more possibilities for advertising and video, but we think that more important than the speed is the “always-on’ aspect–that’s the real change for consumers.”

Industry watchers agree that a constant connection to the web at a fixed price is a crucial aspect of broadband’s success. “Very clearly this type of service will boost e-business,” said Joeri Sels, telecommunications analyst for Julius Bär in Frankfurt. “It doesn’t matter whether it’s “flat rate’ or just a very cheap, reliable fixed-base rate, but the important thing is that the general trend towards “always-on” is certainly in motion.”

Always-on, said Yasskin, will cause fundamental changes in European use patterns, by making it as easy to check the web for basic information like weather and local news as it currently is to check in the newspaper.

“Applications like downloading or renting software and other large digital files will take off with broadband,” said Yasskin, “this will be very different than the dial-up world where this isn’t possible in a reasonable amount of time. If broadband equaled video, it would already be widespread at the workplace–which is, after all, with leased lines a broadband environment. The PPV-movie/broadband scenario is totally wrong. People don’t want to watch feature length movies 18 inches away from their PC.”

Godell agreed that applications are a part of the overall broadband content bundle, and also argued that broadband won’t be limited to PCs. “In 2005, 70% of the UK’s 40 million mobile Internet users will also use the net on PCs or interactive TV,” he said.

Which means it’s time to take a closer look at telcos and cablecos that offer fixed telephone, mobile and cable TV to businesses and consumers in Europe, like KPNQwest, Tele Denmark, Chello, Deutsche Telekom, Bredbandsbolaget AB, Fastweb.it and Telia, as well as optics and box makers, including Lucent, Nokia, Alcatel and Siemens.

Hubba Hubba
One unsurprising–if difficult to discuss–benefactor of broadband access in Europe, of course, will be adult services, which operate some of the most profitable services in the Internet world. That’s nothing new: pornographers have always been on the cutting–and profitable–edge of technology since the invention of the ink quill. Forrester said that in order to shore up businesses that will offer affordable broadband access, telecoms will be forced to drop objections to transmission of adult programming for download.

Which means stay tuned to Tornado-Investor.com for an upcoming profile of high-tech adult offerings from BEATE UHSE AG—Germany’s only publicly listed smut-peddler.