What Drives Internet Demand in the UK?

Abstract

As in many other countries, the UK is currently experiencing an explosion in demand for Internet use by both Residential and Business customers — if current trends continue it is expected that, for British Telecom (BT) at least, Internet usage will have overtaken traditional Voice Telephony as the dominant type of local call traffic by the end of 2000. This chapter presents the results of some recent studies of demand drivers in this fast growing, potentially volatile market. Key issues considered are:

• Sources of information on Internet demand in the UK;

• The drivers of demand for Internet access, and the demographic characteristics of Internet users — present and future;

• The factors driving customer choice of Internet Service Provider (ISP);

• The development of simple econometric models of the demand for Voice and Internet Local telephony, allowing comparison of Income and Price elasticities;

• A comparison of the different characteristics of Voice and Internet calls.

The chapter discusses the detail of a customer choice model of Residential Internet usage, based on sample information from BT’s “Life in the Digital Home” project. The model explains differences in content choice and frequency of usage, which can be benchmarked against the results of the other studies.

BT Analysis and Modeling; Imperial College of Science, Technology and Medicine Management School; Global Crossing