Broadband to boom in new EU countries, Yankee says

Despite their current low rates of broadband penetration, the 10 new countries that joined the European Union (E.U.) in May are poised for rapid growth in high-speed Internet use, thanks to local political support, competition and an up-and-coming middle class, according to The Yankee Group.

The 10 new E.U. member countries had an overall household broadband penetration rate of 1.9 percent at the end of 2003, compared to 12 percent in the other 15 member states, according to a recent report by the Boston, Massachusetts, analyst group. Yankee predicted that the new members could catch up with their neighbors or overtake them over the next five years.

Although the so-called accession countries -- Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, the Slovak Republic and Slovenia -- represent a geographically dispersed and varied group in terms of technology development and adoption, what they all have in common is E.U. ambitions, Yankee notes.

Now that they have joined the union, the new entrants must adhere to E.U. regulations concerning competitive telecommunication services, and implement rules on local loop unbundling, for instance. Given these incentives to equalize competition in their markets, as well as a healthy dose of E.U. funding for technological development, the accession countries are in a position to make up for their currently lagging broadband usage rates.

Predictions are particularly positive for the more developed countries among the new E.U. members, such as the Czech Republic, Hungary and Poland. These three countries each had a 2 percent penetration rate at the end of last year but are estimated to grow to around 17 percent at the end of 2008, buoyed by the wider rollout of cable TV Internet access and lower prices for DSL (Digital Subscriber Line) services, Yankee said.

In fact, Hungary, the Czech Republic and Poland account for 90 percent of the phone lines in the new accession region, and Poland alone accounts for 50 percent of phone lines, Yankee said.

Other countries face greater challenges when it comes to catching up, however. Slovakia, for instance, has only recently begun offering broadband, and Latvia, Lithuania, Malta and Cyprus all have average broadband penetration rates but are small and offer few opportunities for outside providers, Yankee said.

For all the new E.U. countries, achieving mass market access to broadband will take a great deal of time, unless there is a concerted effort to offer wider access by lowering PC costs for lower-income residents, upgrading Internet terminals and introducing pay-as-you-go broadband plans, according to Yankee.

That said, the 10 new E.U. countries have the potential of making a speedy broadband recovery, Yankee said.

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