Study: High-Speed Net Access To Transform E-Biz

The widescale deployment of broadband access, combined with intensified competition among communications, entertainment and technology firms, is likely transform current e-business models in the coming year, according to a study released Monday by Ernst & Young and Cap Gemini Ernst & Young.

"Broadband connectivity will be the tide that lifts all ships," said the report, adding that broadband stands to "fundamentally reshape the way content can be delivered and stored."

The report, "Business Redefined 2001: Connecting Content, Applications and Customers," found that nearly two-thirds of the chief executive officers surveyed believed broadband connectivity is the "most significant" factor influencing the way Internet users will experience entertainment, communications and technology.

The report also said that households currently connected with broadband access "consume" over 20 percent more entertainment time than households without high-speed Net access.

Revenue Avenues

High-speed Web access is gaining greater penetration rates due to increased availability and reliability, as well as lower costs.

As a result, the study found, content producers will be able to capitalize on new revenue streams -- such as content subscription, pay-per-use and time-specific pricing.

"The winning companies will take advantage of the unprecedented opportunities these changes create," the report concluded.

Paying for Content

The report also found that "unprecedented competitive intensity" is fostering the rapid development of new business models and a growth of new distribution channels for both news and entertainment.

The study predicts that content producers who have been distributing their information for free or with traditional pricing will begin changing over to other models, such as subscriptions, per-transaction pricing and time-sensitive pricing.

"The future of content will be about having on-demand access to it, not ownership of the physical medium," said the study.

Complex Competition

Among the factors cited in the report that gave rise to the highly competitive environment were the globalization of markets, deregulation and technology-compressed product life cycles.

In addition, competition is heightened because of enabling technologies that lower the entry barriers for both start-up and established competitors crossing over from other industries, the report found.

"The customer will no longer be held hostage to a single provider," said the report. "Competition is finally taking root."

Many of the CEOs surveyed noted that subscription-based revenue models have succeeded with cable and satellite television companies, despite the existence of free broadcast alternatives.

Net Ad Upturn

Although online advertising is currently stuck in a "sort of purgatory," the study was optimistic about the long-term future of Net ads.

"Advertising in the digital world will be a lot more effective," said the report. "Consumers will have a choice to either remain anonymous and receive content for a premium, or surrender some personal information and receive the content with some personally targeted ads."

In addition, the report predicted that by 2004, online advertising will grow to US$33 billion, more than four times last year's intake of $8 billion. However, the study said that dot-coms will create a smaller part of the advertising pool. Instead, traditional firms will lead the spending spree, accounting for more than half of all online advertising dollars by 2004.

To compile data for the report, researchers interviewed 128 CEOs and analyzed data from more than 100 information sources.