Comment : Broadband Progress Hit By recession As Business Do Without Broadband

After resisting the effects of economic slowdown for months, UK broadband has finally been hit by the arrival of a real recession.

The number of new broadband lines added in the July to September quarter was a clear 20% below earlier expectations.

In April 2008, Point Topic forecast that Britain would add another 800,000 broadband lines in the second half of 2008.

This was supported by the actual numbers for June 2008 which were slightly ahead of the forecast.

"To keep on track Britain needed to add 390,000 broadband lines in the July to September quarter. We estimate that the actual number was only 313,000 – 20% down on the target," says Tim Johnson, Chief Analyst at Point Topic

Local loop unbundling – where ISPs such as Carphone Warehouse and Sky install their own equipment in BT's telephone exchanges – is the main driver of continuing growth in broadband, adding 323,000 lines in the quarter.

Point Topic estimates that Virgin Media may have added another 60,000 cable modem customers while BT and smaller players actually lost about 70,000 net.

"We're now forecasting that only 620,000 broadband lines will be added in the second half of 2008. The forecast for 2009 as a whole is 1.1 million, 200,000 down on the earlier forecast. By the end of 2009 there should be about 18.4 million broadband lines in Britain, 300,000 short of what was expected six months ago," says Johnson

The main practical effects will be that fewer people will switch from relying on dial-up lines to broadband, and about 240,000 more homes will be without any kind of internet access at end-2009.

Many businesses will continue to do without broadband as well.

This will be a blow to the government's objectives for digital inclusion – for example its aim to ensure all children have a computer and internet access at home.

Plans by the Department for Children, Schools and Families to subsidise internet access for up to 150,000 children should help to make up the shortfall but they are unlikely to fill the gap completely.