Broadband is too cheap to pay for the marketing costs needed to persuade users to upgrade their connection, says telecoms analyst Ovum.
The bizarre statement came from Tim Johnson, principal analyst at Ovum, who admitted to vnunet.com that his view was "unfashionable".
"We've been conditioned to expect ADSL at an unrealistic price, and this whole price tangle is strangling the market," he said.
Johnson said the problem was caused by other countries selling cut-price ADSL at a loss to speed up adoption, and unfair business practices by British Telecom (BT).
He said ISPs that have emerged from cut-throat competition in the UK narrowband market have little money to invest in marketing broadband services. Worse still, they do not have the confidence to sell ADSL at the price necessary to cover their marketing costs, which he says is around £70 per month.
ISPs currently offer ADSL for £40-£50 to stay in line with BTopenworld's price of £39.99 per month.
Nick Wells, marketing director at ISP Claranet, told vnunet.com: "BT Ignite's wholesale product is £35 per month plus VAT, more than the £39.99 BTopenworld charges for its service. There's just no incentive for ISPs to market ADSL because we'd lose money on each customer."
Johnson believes this price tangle is holding back the market.
"Our research suggests that if broadband is marketed properly, then people will buy it. And that once they buy it, they wouldn't dream of going back to narrowband. But [which ISPs] are going to market it properly when they lose money on every sale?"
He also suggested that BT has been a major contributor to the failure of broadband to take off thus far in the UK.
"What is wrong is that BT is allowing one part of the organisation to sell in an anti-competitive manner, selling the product at a cheaper price than other ISPs can buy it to resell. I don't think that's legitimate competition."
Johnson thinks that at £70 per month, ISPs could still sell hundreds of thousands of ADSL lines by 2003, even though rival cable modem technology is currently available at around £30 per month.
"I think there is a market to sell hundreds of thousands of lines by 2003 at £70 per month. It would have to be marketed properly, but there are enough people who can afford £70 per month for a service, as long as it gives them what they want."
He suggested teleworkers, the adult entertainment industry and heavy internet users as the target market.
Duncan Ingram, senior vice president at BTopenworld, told vnunet.com that demand for broadband was overstated. He refutes the suggestion that it has an unfair advantage.
"I think we have to be careful, as people in the industry, not to overestimate the enthusiasm of the people for moving on. Broadband is a leading edge technology and there is a market there for it, but it is not inherently a mass-market proposition."
Ovum's figures show that there are 600,000 broadband lines installed in Germany, where monthly ADSL costs are 28 per cent cheaper than the UK, compared with 70,000 in the UK.
The analyst ranks the UK sixth out of the G7 leading industrial countries in broadband penetration.
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